mini budget

[tuffers#1]

[Dunners]

Ooft!

Latest from Moneyfacts on new fixed rate mortgage deals:

Average 2yr fixed rate deal was 2.25% a year ago, now 6.07%
Average 5yr fixed rate deal was 2.55% a year ago, now 5.97%

When adjusted for as a percentage of income, this is going to painful for a lot of people.

[Max Fowler]

But 5 and 6% interest rates were absolutely normal not that long ago.

[Dunners]

But 5 and 6% interest rates were absolutely normal not that long ago.

I can't tell if you're being serious, or if you're playing to the "old b*stard" trope I referenced back on page 3 of this thread:

The latest data however is predicting that rates could peak above 5.75%, and some even saying that they could be above 6%.

At this point in the discussion you'll usually get some old b*stard come along and go on about rates being 15% once upon a time. The implication being that this is no big deal and we should stop whinging and cut back on our avocados. However, while double-digit interest rates were a thing back in the past, it's a false equivalence as you must make adjustments for affordability.

This means factoring in other debt burdens, relative household income levels, mortgage terms and mortgage rates. When you do this things look very different. For comparison, a base rate of 14.2% in 1980 (when people had relative higher incomes and lower indebtedness) will feel equivalent to a 3% base rate today.



A consequence of QE, while it is argued by some to have saved the banks and us all from societal collapse, is that we're now more vulnerable to even the slightest increases in base rates. And if this sh*tstorm wasn't enough, just when these massive rate hikes could hit is exactly when there is a huge number of fixed-rate mortgage deals due to come up for renewal.

[BoniO]

Truss gets backing from a fine Statesman:-

https://uktimes.news/at-least-despite-a ... liz-truss/

[Max Fowler]

I'm not talking about the double digits you old bastards had. Just a perfectly reasonable and relatively recent 5 or 6%.

[BoniO]

Where does middle aged gobsh-te end and old b*stard commence?

[Max Fowler]

Where does middle aged gobsh-te end and old b*stard commence?

[Max Fowler]

So we need the house values to lower, so that monthly mortgage repayments are affordable with these higher interest rates.

That sounds perfectly sensible to me.

[StillSpike]

Ooft!

Latest from Moneyfacts on new fixed rate mortgage deals:

Average 2yr fixed rate deal was 2.25% a year ago, now 6.07%
Average 5yr fixed rate deal was 2.55% a year ago, now 5.97%

When adjusted for as a percentage of income, this is going to painful for a lot of people.

I well remember the awful times at the end of the 80's, early 90's. Mortgage just about did for me. Tough times a-coming.

[Dunners]

So we need the house values to lower, so that monthly mortgage repayments are affordable with these higher interest rates.

That sounds perfectly sensible to me.

I agree. The economy became too accustomed to the age of ultra-low interest rates. But this snap back to a norm, while needed, is going to hurt a lot of people.

Not me though.

[Long slender neck]

I was also too clever to be stung by this.

[The Mindsweep]

Gilts today!

Pensions, oh dear.

[Max Fowler]

I was also too clever to be stung by this.

It's not clever to be mortgage free, just good fortune.

[StillSpike]

I was also too clever to be stung by this.

It's not clever to be mortgage free, just good fortune.

Age has quite a bit to do with it, to be honest

[Max Fowler]

Yeah, true enough.

[Dunners]

Gilts today!

Pensions, oh dear.

I can't even bring myself to look at my pension funds. My S&S ISA is down to where it last was in May 2019.

But thankfully I'm young enough to ride this cycle out.

[Adz]

So we need the house values to lower, so that monthly mortgage repayments are affordable with these higher interest rates.

That sounds perfectly sensible to me.

You would also need a debt jubilee though.

[Max Fowler]

So we need the house values to lower, so that monthly mortgage repayments are affordable with these higher interest rates.

That sounds perfectly sensible to me.

You would also need a debt jubilee though.

Even better .

[Dunners]

Anyway, Builtplace have pulled together this graph which demonstrates how interest rates reconcile as a percentage of household income over the years.

The thing is this may not actually result in much of a reduction in house prices. Compared to the 1990 Q2 equivalent, the percentage of homeowners with a mortgage is significant lower now than it was back then. So much so that the majority of homeowners may even be insulated from the effects of interest rate rises, and therefore not feel compelled to sell.

Unless the balance between supply and demand is shifted, we could see a worst-case scenario play out, whereby the housing market stagnates at high prices, and remains propped up by under-supply. Meanwhile, those who didn't get on the property ladder, which will mainly be younger people, will be stuck in a poorly regulated and increasingly unaffordable rental market.

I also still would not be surprised to see some changes in mortgage policy. The Johnson government had been looking seriously at the Japanese model of lifetime, hereditary mortgages.

[Max Fowler]

Literally no idea what that graph is showing. Loan to income ratios of 1.5??

[Dunners]

Oh come on, the red squiggles are as clear as mud!

[The Mindsweep]

Global issue?

No, born & bread at No10 & No11 & 55 Tufton Street

[The Mindsweep]

The fallout continues

[Dunners]

It appears that attempts to put the genie back in the bottle have been unsuccessful.