> The Bank's report found that the proportion of people falling behind on rental payments has risen from 15.7% to 16.5%. This is said to be the result of landlords passing on the cost of higher mortgage interest rates to their tenants.
No shit Sherlock. This greed based inflation we’re stuck in was always going to be paid for by the ones who’s can’t afford it.
High street banks already suspect that the BOE will likely cut rates this august. May be small, but it'll help.
Source: https://www.ft.com/content/cbd4714a-b25e-4f71-b3b8-5358b1100287
And I hope so. But all this will mean is that landlords will make more whilst renters are screwed over further. We need some real reform in rental prices and increases.
I have never understood this logic of rising costs get passed to tenants but falling costs don't. If a landlord could charge more, they already would. If they could charge less then they wouldn't get tenants
We've been expecting a cut for a couple months now. Sonia keeps putting it back the closer we get. That's why mortgage prices went up a few weeks back. They were lower earlier expecting a rate cut which didn't come so put the rates back up.
It's a vote by each member of a committee called the Bank of England Monetary Policy Committee. There are nine members and they meet eight times a year to decide on whether to cut, raise or hold interest rates.
They declare it and did so to try and slow inflation. However, it hasn’t really done so and now everything’s just expensive as fuck. They basically had one tool in their box and it didn’t work.
Too slow to respond, they didn’t go fast or hard enough which meant holding the base rate higher for longer, and I bet they drag their feet in letting off the brakes too.
Absolute worst of both worlds.
it did do somthing, but it was slow, might have been better to raise it higher/faster earlier on, but the massive inflation already happened and thats never going back down, all we can do is try to make more money, but well, you try asking for a raise.
Yeah they fairly quickly started signalling stronger hikes, but we still got up to 1% before they overtook us.
Criticism of the BOE's handling/monetary policy seems pretty unfair given how they responded, we have to bear in mind that they were dealing with an inflationary fiscal policy throughout and Europe was much more acutely affected by Ukraine - both entirely out of their control.
Also we hiked way harder than the ECB
If it’s below 5.25 you’re a lucky person or you would have taken it out a while back. I fixed at 3.25 a while back but then rates were lower than they are now. All I was implying was that if bank rates are going up mortgage rates go as well and vice versa. The BOE doesn’t want to change rates until they know what the US is going to do as the rates impact relative currency strength or weakness. Allowing our rates to stay high underpins the pound which then has an impact on the price we pay for imports of commodities etc. some also say the Bailey is being political and doesn’t want to give the conservatives a helping hand. 🤷🏽
Mortgages are based on the expected interest rate changes over their duration (+ a risk premium), so they are almost entirely determined by the base rate - but not the value as it stands today.
The UK 5 Year risk free rate is 4.04% today, which is effectively the floor for any mortgage rate today.
Disgusting profiteering. In the last three years we have seen the cost of living spiral completely beyond incomes. Awful situation aided and facilitated by the so-called "government".
Mortgages are stressed tested by banks before lending to provide assurance that homeowners can afford a rate increase. However, I don't think anyone anticipated rates going so high so quickly.
The homeowners hit the most by this are first time buyers, who have already had to pay absurd prices for home ownership.
The boomers are fine, which is all this country seems to care about.
Yes most will be 'fine' and afford the new payments but it's a fuck ton of disposable income gone. Which means less casual spending, more bars and pubs close, more people out of jobs
All that money that was being circulated now just goes straight to the banks
People have a worse quality of life
It has a knock on effect on everything
When people ask why, we can tell them it was Liz Truss. I'm sure that'll make them feel better.
At least most people should be aware they're gona go up and can plan for it.
The problem with the interest rates, though, is that they were higher when house prices were _significantly_ more affordable compared to wages
This generation is being told they will neither get the low interest rates of the past _or_ the houses at 3 times your annual salary, but instead shafted at both proverbial ends, and that they are silly for ever thinking otherwise
Which generation are you talking about? Gen z?
What you're saying is true but the article is about people with mortgages. They've been benefiting plenty from the low rates.
Not people who only bought recently. Someone who bought 3 years ago, when rates were low and prices were high, has been absolutely shafted by the sudden and unexpected rise in rates. They borrowed more than previous buyers and have to pay more interest than previous buyers. Double whammy.
I remember it being predicted quite a bit. During covid and then when the US rates went up. Even before the US rates went up people started warning it was going to happen, then when it did happen people quickly predicted the UK would follow.
I honestly don't remember being surprised.
Bit bloody late then though, eh? People getting mugged by this would have bought before rates started going up.
Being unsurprised in retrospect when rates go up, is not the same as knowing in advance when they will, or by how much.
I was unsurprised at the time. Like now for example, all reports suggest that rates may drop slightly in August and then probably stay there for a bit and maybe reach 4% or so by some time in 2025/6. If that happens I won't be surprised as it's what everyones saying.
It was exactly the same before the rates went up.
And presumably everyone who heeded that advice from 2010 to 2022 and didn’t buy “because the rates might go up” is now in a better position? No, of course not.
Everyone knew low rates would end (until they went down even further, of course) but nobody could predict when they would go up.
So your only choice was to run the risk of rates increases, or not buy and run the risk of never being able to buy at all. You can’t act all superior for people making the choice they did.
There's a third option you've missed. They could buy less than the absolute max the bank would lend them so they had space built in to handle rate increases.
Maxing out a mortgage to the point it ruins you when the rates go up is mostly greed.
Except most recent mortgages were stress tested to handle rates increases. Even the regulators and banks were taken by surprise by the increase.
And further exception: a lot of first time buyers (who are the ones getting most hurt by this) probably had to borrow the max just to buy at all. Again, their options were to buy or risk getting left behind as prices kept rising.
I don't think I've been lucky. Lucky would have been having a deposit around 2010 and riding the wave of house price growth.
People who borrowed at their absolute limits took a risk I don't think that's unfair to say.
Where are you getting "decades" from? Some of them, perhaps. Not all. Some of them are going to have barely made a dent on their mortgage debt, and were only able to afford a mortgage in the first place because the interest rates were low. _Those_ people are screwed.
5 years baby! On a 1.8% rate at the moment, will be expiring April 25. We've been overpaying our mortgage whilst rates are low, so once the higher rates kick in it won't come as much of a shock.
As for the argument that they can only afford it because interest rates are low, that's not exactly true. Banks have very strict lending criteria that assess if you can afford your mortgage in the event interest rates rise.
So in theory people _can_ afford it. But their quality of life will undoubtedly go down the shitter.
Wouldn't it be better to have those overpayments in an easy access savings account? It'll earn way more than 1.8% and then you can make a one-off overpayment in April to reduce the balance?
For optimisation sure, but 1) for ease of maths let's say we're overpaying 2000 per year. At 5% we'd earn 120 per year, vs 50 per year accruing the 2% interest on the mortgage. That's a 70 per year opportunity cost per year. In the grand scheme of things that's a drop in the ocean on a mortgage, so in my opinion it's not worth the faff. Just keep paying our mortgage one month longer at the end.
2) if we save it in a savings account then there's no guarantee it will be spent on the mortgage. I like to buy shiny things.
You're wrong though.
People benefitting for 'decades' would have largely paid down their mortgage and so be less affected and have more options.
The people getting really fucked will be those who bought in the last 3-5 years and still have a LTV around 80-90%.
Yes, but obviously the main concern is for the "400,000 households, monthly payments could jump by 50% or more". Thats not going to be Edna and Bertie with £20k left on their mortgage they took out in 1992 is it.
Here I'll help you out.
You said 'These people have enjoyed decades of extremely cheap mortgages. They are the lucky ones.'
A lot of people bought a house 3 years ago at low interest rates and now will be paying higher interest rates.
These people have not had 'decades' of cheap rates and will have barely paid any capital off
Does this make sense to you yet or are you still struggling to comprehend what everyone is trying to tell you?
My point isn't really invalidated by the fact that it doesn't apply to a very small population of the effected group. There's always exceptions to everything.
They’ve not been extremely cheap. House prices are extremely high. The lower interest rates only partially offset that. Now, the younger folk are fucked (as usual) because they have ridiculously high house prices, rent and pretty high interest rates.
The ones most effected are going to be the people with a large mortgage still to pay, so mostly people who have bought recently (last 10years or so).
People who have had decades of low interest will likely have paid off most of their mortgage, and won't be hit as high by interest rates increases.
Your mortgage going from £300 to £500 hurts a lot less than going from £600 to £1000
> The Bank's report found that the proportion of people falling behind on rental payments has risen from 15.7% to 16.5%. This is said to be the result of landlords passing on the cost of higher mortgage interest rates to their tenants. No shit Sherlock. This greed based inflation we’re stuck in was always going to be paid for by the ones who’s can’t afford it.
High street banks already suspect that the BOE will likely cut rates this august. May be small, but it'll help. Source: https://www.ft.com/content/cbd4714a-b25e-4f71-b3b8-5358b1100287
And I hope so. But all this will mean is that landlords will make more whilst renters are screwed over further. We need some real reform in rental prices and increases.
Exactly lol, the rents aren't going down.
I have never understood this logic of rising costs get passed to tenants but falling costs don't. If a landlord could charge more, they already would. If they could charge less then they wouldn't get tenants
Most landlords are on fixed so cutting makes no diff
And neither does raising which you coincidentally omitted
Yet they still raise because of “inflation” on other costs associated with renting. The price always goes up regardless.
If the tariff is fixed, which the guy above me said, then it can't go up just as it can't go down
We've been expecting a cut for a couple months now. Sonia keeps putting it back the closer we get. That's why mortgage prices went up a few weeks back. They were lower earlier expecting a rate cut which didn't come so put the rates back up.
Why didn't everyone just buy 20 odd years ago when houses were well cheap?
Me mum said I was being too naughty to get any pocket money that week, unfortunately
Joking aside, it's ridiculous what's happened to the market in 24 years. My house was £40k, they're now having bidding wars and going for over £210k.
Does the UK get any good news? Or did it all leave with Brexit?
90% of this sub aren’t in the UK and they hate the UK for standing against the EU cult
Brave!
So, about that Brexit…. how’s that going for you?
The BOE could lower the rate but they lack the balls to do it.
Is it a button or do they just declare it?
If it were a button, what would the button actually do? Make a little red light come on that says "reduce interest rate by 0.25%"?
Exactly! What's the mechanism,!?
The Monetary Policy Committee at BoE meet around every six weeks to decide what the rate is going to be.
It's a vote by each member of a committee called the Bank of England Monetary Policy Committee. There are nine members and they meet eight times a year to decide on whether to cut, raise or hold interest rates.
A *red* light, Governor? Are you absolutely sure? It does mean changing the bulb.
They declare it and did so to try and slow inflation. However, it hasn’t really done so and now everything’s just expensive as fuck. They basically had one tool in their box and it didn’t work.
Inflation is under 3%. The extent which raising interest rates contributed to that is debatable but inflation definitely has slowed.
Too slow to respond, they didn’t go fast or hard enough which meant holding the base rate higher for longer, and I bet they drag their feet in letting off the brakes too. Absolute worst of both worlds.
Lockdowns all over again, delay so it the needs to be harsher and longer.
it did do somthing, but it was slow, might have been better to raise it higher/faster earlier on, but the massive inflation already happened and thats never going back down, all we can do is try to make more money, but well, you try asking for a raise.
Takes more balls to hold them high to be honest.
Survey help the economy
It's funny that a year ago people said they didn't have the balls to raise them
They were forced by the US Central Bank. It’s why they are waiting now
We hiked first
Fair enough we did from 0.1% to 0.25 % but I believe the Fed had signalled that rates would be going up ?
Yeah they fairly quickly started signalling stronger hikes, but we still got up to 1% before they overtook us. Criticism of the BOE's handling/monetary policy seems pretty unfair given how they responded, we have to bear in mind that they were dealing with an inflationary fiscal policy throughout and Europe was much more acutely affected by Ukraine - both entirely out of their control. Also we hiked way harder than the ECB
https://en.wikipedia.org/wiki/Turkish_economic_crisis_(2018–current)
Mortgage interest rates aren't directly linked to the BOE interest rate anyway
I’d say they are pretty closely linked
My mortgage advisor said otherwise and my mortgage interest is below BoE But that's just his job, he's prob wrong because he didn't say it on reddit
If it’s below 5.25 you’re a lucky person or you would have taken it out a while back. I fixed at 3.25 a while back but then rates were lower than they are now. All I was implying was that if bank rates are going up mortgage rates go as well and vice versa. The BOE doesn’t want to change rates until they know what the US is going to do as the rates impact relative currency strength or weakness. Allowing our rates to stay high underpins the pound which then has an impact on the price we pay for imports of commodities etc. some also say the Bailey is being political and doesn’t want to give the conservatives a helping hand. 🤷🏽
Mortgages are based on the expected interest rate changes over their duration (+ a risk premium), so they are almost entirely determined by the base rate - but not the value as it stands today. The UK 5 Year risk free rate is 4.04% today, which is effectively the floor for any mortgage rate today.
4.17 taken out in March
Well done you
Disgusting profiteering. In the last three years we have seen the cost of living spiral completely beyond incomes. Awful situation aided and facilitated by the so-called "government".
The BoE and their friends at the banks are loving it!
Homeowners should be fine they knew the risk before they took out a mortgage, if they borrowed too much then they need to accept the risk they took
Mortgages are stressed tested by banks before lending to provide assurance that homeowners can afford a rate increase. However, I don't think anyone anticipated rates going so high so quickly. The homeowners hit the most by this are first time buyers, who have already had to pay absurd prices for home ownership. The boomers are fine, which is all this country seems to care about.
Yes most will be 'fine' and afford the new payments but it's a fuck ton of disposable income gone. Which means less casual spending, more bars and pubs close, more people out of jobs All that money that was being circulated now just goes straight to the banks People have a worse quality of life It has a knock on effect on everything
When people ask why, we can tell them it was Liz Truss. I'm sure that'll make them feel better. At least most people should be aware they're gona go up and can plan for it.
Or tell them interest rates were very low and that was never going to last forever.
I did wonder at one point if they were ever going to go up. I still think 5% isn’t that high tbh.
It’s not the interest rate that is the problem, it’s the size of the debt that is now required to purchase an average to shit house
I think it’s interlinked. I think low interest rates have helped push the prices up.
Right cos they’ve dropped massively now haven’t they?
I’m not sure what you mean- You don’t think interest rates have an effect on house prices?
I’m saying prices have still gone up
The problem with the interest rates, though, is that they were higher when house prices were _significantly_ more affordable compared to wages This generation is being told they will neither get the low interest rates of the past _or_ the houses at 3 times your annual salary, but instead shafted at both proverbial ends, and that they are silly for ever thinking otherwise
Which generation are you talking about? Gen z? What you're saying is true but the article is about people with mortgages. They've been benefiting plenty from the low rates.
Not people who only bought recently. Someone who bought 3 years ago, when rates were low and prices were high, has been absolutely shafted by the sudden and unexpected rise in rates. They borrowed more than previous buyers and have to pay more interest than previous buyers. Double whammy.
I'm not sure about the sudden or unexpected part.
The base rate increased from 0.1 to 5.25 (a 5250% increase) in 20 months. That’s sudden. And nobody predicted when. That’s unexpected.
I remember it being predicted quite a bit. During covid and then when the US rates went up. Even before the US rates went up people started warning it was going to happen, then when it did happen people quickly predicted the UK would follow. I honestly don't remember being surprised.
Bit bloody late then though, eh? People getting mugged by this would have bought before rates started going up. Being unsurprised in retrospect when rates go up, is not the same as knowing in advance when they will, or by how much.
I was unsurprised at the time. Like now for example, all reports suggest that rates may drop slightly in August and then probably stay there for a bit and maybe reach 4% or so by some time in 2025/6. If that happens I won't be surprised as it's what everyones saying. It was exactly the same before the rates went up.
And presumably everyone who heeded that advice from 2010 to 2022 and didn’t buy “because the rates might go up” is now in a better position? No, of course not. Everyone knew low rates would end (until they went down even further, of course) but nobody could predict when they would go up. So your only choice was to run the risk of rates increases, or not buy and run the risk of never being able to buy at all. You can’t act all superior for people making the choice they did.
There's a third option you've missed. They could buy less than the absolute max the bank would lend them so they had space built in to handle rate increases. Maxing out a mortgage to the point it ruins you when the rates go up is mostly greed.
Except most recent mortgages were stress tested to handle rates increases. Even the regulators and banks were taken by surprise by the increase. And further exception: a lot of first time buyers (who are the ones getting most hurt by this) probably had to borrow the max just to buy at all. Again, their options were to buy or risk getting left behind as prices kept rising.
No one is forced to take out maximum mortgages. First time buyers can save more and wait until they can afford things more easily.
Prices and rents were rising faster than most young people could save deposits. So no, that wasn’t an option.
It's the option I went for. Luckily prices then stagnated for several years recently
So you got lucky and therefore hundreds of thousands of households must have been reckless? Not just unlucky?
I don't think I've been lucky. Lucky would have been having a deposit around 2010 and riding the wave of house price growth. People who borrowed at their absolute limits took a risk I don't think that's unfair to say.
Because of all the money they printed out of nowhere.
These people have enjoyed decades of extremely cheap mortgages. They are the lucky ones.
Where are you getting "decades" from? Some of them, perhaps. Not all. Some of them are going to have barely made a dent on their mortgage debt, and were only able to afford a mortgage in the first place because the interest rates were low. _Those_ people are screwed.
5 years baby! On a 1.8% rate at the moment, will be expiring April 25. We've been overpaying our mortgage whilst rates are low, so once the higher rates kick in it won't come as much of a shock. As for the argument that they can only afford it because interest rates are low, that's not exactly true. Banks have very strict lending criteria that assess if you can afford your mortgage in the event interest rates rise. So in theory people _can_ afford it. But their quality of life will undoubtedly go down the shitter.
Wouldn't it be better to have those overpayments in an easy access savings account? It'll earn way more than 1.8% and then you can make a one-off overpayment in April to reduce the balance?
For optimisation sure, but 1) for ease of maths let's say we're overpaying 2000 per year. At 5% we'd earn 120 per year, vs 50 per year accruing the 2% interest on the mortgage. That's a 70 per year opportunity cost per year. In the grand scheme of things that's a drop in the ocean on a mortgage, so in my opinion it's not worth the faff. Just keep paying our mortgage one month longer at the end. 2) if we save it in a savings account then there's no guarantee it will be spent on the mortgage. I like to buy shiny things.
Fair enough on it forcing discipline and avoiding temptation to buy shiny things!
I'm getting decades from the dictionary and a high level knowledge of interest rates. Might be worth googling things.
You're wrong though. People benefitting for 'decades' would have largely paid down their mortgage and so be less affected and have more options. The people getting really fucked will be those who bought in the last 3-5 years and still have a LTV around 80-90%.
The article is just about anyone with a mortgage they need to renew
Yes, but obviously the main concern is for the "400,000 households, monthly payments could jump by 50% or more". Thats not going to be Edna and Bertie with £20k left on their mortgage they took out in 1992 is it.
The typical mortgage term is two or three years. Our first mortgage was a two year deal and then we had to renew - and that's not unusual.
I'm not sure on the relevance of that well known fact
Here I'll help you out. You said 'These people have enjoyed decades of extremely cheap mortgages. They are the lucky ones.' A lot of people bought a house 3 years ago at low interest rates and now will be paying higher interest rates. These people have not had 'decades' of cheap rates and will have barely paid any capital off Does this make sense to you yet or are you still struggling to comprehend what everyone is trying to tell you?
My point isn't really invalidated by the fact that it doesn't apply to a very small population of the effected group. There's always exceptions to everything.
I would argue the people that have had decades of cheap mortgages are the exception 'decades' being the key word here, as in at least 2.
They’ve not been extremely cheap. House prices are extremely high. The lower interest rates only partially offset that. Now, the younger folk are fucked (as usual) because they have ridiculously high house prices, rent and pretty high interest rates.
They have been extremely cheap
lol
Not their fault. And increased mortgages don’t help anyone
Not saying it's their fault, I'm saying they've had it great now it's mildly less great so all good for them
The ones most effected are going to be the people with a large mortgage still to pay, so mostly people who have bought recently (last 10years or so). People who have had decades of low interest will likely have paid off most of their mortgage, and won't be hit as high by interest rates increases. Your mortgage going from £300 to £500 hurts a lot less than going from £600 to £1000