I cannot afford my mortgage interest rate increase
Discussion
Listened this morning to a radio programme caller.
"Early next year, my fixed rate mortgage will increase from 1.79% to 5.3%. My savings have nearly gone , so I will not be able to pay the higher monthly payments."
Whilst feeling sorry for the person's predicament (there are probably a huge number in a similarly awful position), the older generation might be remembering their mortgage payment days.
A 1.79% mortgage could not even be dreamt of by the 'baby boomer' generation. They paid 8%, 12%, even at one point over 15% interest rates.
For the past 10 years, interest rates have been artificially low (base rates at an historic 300 year low), so unfortunately perhaps, the younger generation might have thought such low rates are perfectly normal. That presumably also encouraged greater amounts of borrowing, which in turn had an upward effect on property prices. It is all connected.
An unfortunate mess that was forseeable, but possibly only by older people who had paid far more for their mortgages, or by younger home buyers who have studied financial history.
The action for mortgage borrowers to minimise future trouble, would have been to set aside some money, during the period of the artificially low mortgage payments. That would have needed strong discipline though, when so much tempting consumers goods was being heavily marketed. A more expensive car with monthly PCP perhaps.
I have said before, the immediate future might unfortunately be grim for many. Unusual circumstances have arisen, with several different cost increases all occurring at the same time and they affect many countries, not just the UK.
1. Sudden increased demand following the pandemic = price increases.
2. Invasion of Ukraine = further increasing the already rising world energy prices and reducing the supply of certain commodities.
Restricted commodities usually then feed on to other materials and products, causing more price increases.
3. Inflation resulting from 1. & 2., causing world banks to increase interest rates, in an effort to reduce consumption and inflation.
Point 3. must be open to some debate, because 1. & 2. already have some effect on reducing consumption and local interest rate rises cannot have an immediate effect on reducing world oil and gas prices (originally caused by restricted supply).
I hope better times soon return. Much is presumably dependent on one person (not naming).
"Early next year, my fixed rate mortgage will increase from 1.79% to 5.3%. My savings have nearly gone , so I will not be able to pay the higher monthly payments."
Whilst feeling sorry for the person's predicament (there are probably a huge number in a similarly awful position), the older generation might be remembering their mortgage payment days.
A 1.79% mortgage could not even be dreamt of by the 'baby boomer' generation. They paid 8%, 12%, even at one point over 15% interest rates.
For the past 10 years, interest rates have been artificially low (base rates at an historic 300 year low), so unfortunately perhaps, the younger generation might have thought such low rates are perfectly normal. That presumably also encouraged greater amounts of borrowing, which in turn had an upward effect on property prices. It is all connected.
An unfortunate mess that was forseeable, but possibly only by older people who had paid far more for their mortgages, or by younger home buyers who have studied financial history.
The action for mortgage borrowers to minimise future trouble, would have been to set aside some money, during the period of the artificially low mortgage payments. That would have needed strong discipline though, when so much tempting consumers goods was being heavily marketed. A more expensive car with monthly PCP perhaps.
I have said before, the immediate future might unfortunately be grim for many. Unusual circumstances have arisen, with several different cost increases all occurring at the same time and they affect many countries, not just the UK.
1. Sudden increased demand following the pandemic = price increases.
2. Invasion of Ukraine = further increasing the already rising world energy prices and reducing the supply of certain commodities.
Restricted commodities usually then feed on to other materials and products, causing more price increases.
3. Inflation resulting from 1. & 2., causing world banks to increase interest rates, in an effort to reduce consumption and inflation.
Point 3. must be open to some debate, because 1. & 2. already have some effect on reducing consumption and local interest rate rises cannot have an immediate effect on reducing world oil and gas prices (originally caused by restricted supply).
I hope better times soon return. Much is presumably dependent on one person (not naming).
We survived the 15% days!
It's all the gubberment's fault of course...
But seriously, what with that and the energy increases, there is much domestic carnage to come.
We also seem to expect the standard of living to go up year after year, but there is no law that says it should. Ergo, the standard of living will have to go down, there is no more free money to prop it up, and people will just have to get used to it. They will hate it, and so they will vote Labour in, and Labour will do no better because they can't.
It's all the gubberment's fault of course...
But seriously, what with that and the energy increases, there is much domestic carnage to come.
We also seem to expect the standard of living to go up year after year, but there is no law that says it should. Ergo, the standard of living will have to go down, there is no more free money to prop it up, and people will just have to get used to it. They will hate it, and so they will vote Labour in, and Labour will do no better because they can't.
The "older" generation who talk about "when they had to pay 10% for their mortgage" forget that the value of their property and therefore their mortgage were so much lower than the property values of today. They also forget that they will have benefited massively in the property prices since the times when they had to pay 10% rates.
There seems to be a "them and us" in this debate. With the older generations looking down on the younger people who have had to pay £500k for a 2 bed mid-terrace, sold to them by someone who paid £30k for it in 1990 when they had to pay 10% on their £20k mortgage.......
It's frustrating to read......
There seems to be a "them and us" in this debate. With the older generations looking down on the younger people who have had to pay £500k for a 2 bed mid-terrace, sold to them by someone who paid £30k for it in 1990 when they had to pay 10% on their £20k mortgage.......
It's frustrating to read......
in fairness while we had 15% interest rates the houses were cheaper as a salary multiple (at least in the SE, other areas may differ) and the lower interest rate off-set that difference. Now that rates are rising the higher prices combined with higher rates can really bite. That's not to say that people have not been too profligate (everything new and on drip) and now the chickens are coming home to roost...
The big difference is the cost of property today compared to wages/salaries, versus 40 years or so ago.
Yes we had mortgage rates up at 15% for a time but on a mortgage that would not even be enough for a deposit at todays prices.
I bought my first house for £28k with a mortgage of £25k and I was earning nearly that at the time.
You can understand why so many younger buyers are now struggling.
Edited to say I don't look down on them, I have a great deal of sympathy for anyone trying to establish themselves on the housing ladder today.
My generation have had it so easy by comparison.
Yes we had mortgage rates up at 15% for a time but on a mortgage that would not even be enough for a deposit at todays prices.
I bought my first house for £28k with a mortgage of £25k and I was earning nearly that at the time.
You can understand why so many younger buyers are now struggling.
Edited to say I don't look down on them, I have a great deal of sympathy for anyone trying to establish themselves on the housing ladder today.
My generation have had it so easy by comparison.
Edited by Monkeylegend on Thursday 17th November 10:24
Much harder now- when I bought a house in Canada (2000 Sq ft detached bungalow) interest rates were 17% but the house was $90k. My wife and I had a joint income of $70k.
Today the concept of a house being less than 1.5 times annual income is fantasy. More like 7 times in Toronto.
Lots of sympathy for those facing this challenge.
Today the concept of a house being less than 1.5 times annual income is fantasy. More like 7 times in Toronto.
Lots of sympathy for those facing this challenge.
What's your point caller? Just seems to be a statement of smugness with no real point or question.
I don't buy the "interest rates were artificially low and the norm will resume". High child mortality used to be "the norm", life expectancy roughly 10 years lower than what it is today was "the norm' in 1980. The world changes, society changes and the economic make up of the world also changes. More people now have debt and credit and I think the norm will be interest rates lower than the doom mongers would wish. Interest rates are only there for lenders to make money on money, it's not like the weather, unpredictable and beyond all control. There are contributing factors (inflation caused partly by the free jets tokens the government handed out for example) but it's a figure that is set by mere mortals and has to be balanced at the tipping point of affordability as the last thing lenders want is borrowers to default.
I don't buy the "interest rates were artificially low and the norm will resume". High child mortality used to be "the norm", life expectancy roughly 10 years lower than what it is today was "the norm' in 1980. The world changes, society changes and the economic make up of the world also changes. More people now have debt and credit and I think the norm will be interest rates lower than the doom mongers would wish. Interest rates are only there for lenders to make money on money, it's not like the weather, unpredictable and beyond all control. There are contributing factors (inflation caused partly by the free jets tokens the government handed out for example) but it's a figure that is set by mere mortals and has to be balanced at the tipping point of affordability as the last thing lenders want is borrowers to default.
Edited by nunpuncher on Thursday 17th November 10:44
popeyewhite said:
BoRED S2upid said:
If anyone thought interest rates starting with a 1 we’re going to stay forever they were kidding themselves.
Pure naivety.My first wage? !n 1980 £380 pw working as an electrical engineer. God only knows what that would pay now.
popeyewhite said:
BoRED S2upid said:
If anyone thought interest rates starting with a 1 we’re going to stay forever they were kidding themselves.
Pure naivety.I'm big on personal responsibility, but I resent how slack banks have been in dishing out mortgages.
30 years ago, we had to beg for 3x salary, now, I hear of 5x or 8x or x both salaries or made up self certification numbers.
The banks should be the gatekeepers for loans.
I would come up with some sort of legislation to only allow 3x salary to be secured against the house, and anything over that cannot be reclaimed by the bank in case-of-default.
Edited by BOR on Thursday 17th November 10:49
BOR said:
popeyewhite said:
BoRED S2upid said:
If anyone thought interest rates starting with a 1 we’re going to stay forever they were kidding themselves.
Pure naivety.I'm big on personal responsibility, but I resent how slack banks have been in dishing out mortgages.
30 years ago, we had to beg for 3x salary, now, I hear of 5x or 8x or x both salaries or made up self certification numbers.
The banks should be the gatekeepers for loans.
I would come up with some sort of legislation to only allow 3x salary to be secured against the house, and anything over that cannot be reclaimed in case-of-default.
s1962a said:
popeyewhite said:
BoRED S2upid said:
If anyone thought interest rates starting with a 1 we’re going to stay forever they were kidding themselves.
Pure naivety.My first wage? !n 1980 £380 pw working as an electrical engineer. God only knows what that would pay now.
What's that got to do with anything? Well, I doubt very much that someone just starting out as an electrical engineer today could buy a sub on their gross monthly wage let alone on their net weekly wage. And this is part of the problem, wages have not risen at the same rate as many other things, especially houses.
popeyewhite said:
BoRED S2upid said:
If anyone thought interest rates starting with a 1 we’re going to stay forever they were kidding themselves.
Pure naivety.My first wage? !n 1980 £380 pw working as an electrical engineer. God only knows what that would pay now.
BOR said:
now, I hear of 5x or 8x or x both salaries or made up self certification numbers.
Who's getting loans like that? I don't think your average person in the street is.Both my daughters struggled to get their very sensible mortgages and both they and their husbands are in decent public sector jobs at a middling level - not massively paid, but not bad either.
I'm surprised no-one has blamed youngsters having iPhones and leased white Audis yet.
Some of the salaries from the 80's mentioned earlier seem very high - I was on £8K when we got our first house and £12.5K (although had a company car|) in 1986 when we got our second. Wife was at home looking after the kids.
Edited by Sheepshanks on Thursday 17th November 11:02
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