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siscott85
“why I am I seeing stories on the bbc about peoples deals going from £289pcm to £1150pcm”
It’s a very worst case, someone on an interest only, sub 2% mortgage going onto their banks SVR. If all you’re paying is interest, then triple the rate, triple the payment.
Thanks for the explanation. I was wondering this myself - saw an article a week or so ago where a young couple were complaining that their mortgage payments had gone from £400 - £1200. They had a nice place in London and I did wonder how on Earth they were only paying £400 for the mortgage - didn't occur to me that is the interest payment only! Eek.
I couldn't see how this was possible, but I was thinking of repayment mortgages not interest-only.
Would a VAT increase be a fairer way of reducing money supply? Many aren't affected by interest rate rises but many of those that have mortgages start to really suffer; renters could also be affected with owners wanting to increase their rental income - though they can only do what the market will bear.
I suppose the other way of looking at it, is they were paying £400 pcm on interest only, what would the alternative be? probably paying a lot more in rent. So they were probably paying less overall, and hoping that the equity would keep increasing to help pay off the mortgage. I know a few who are doing this. So they will probably loose their homes, overall they will probably still be financially better off for taking the risk. Not that that will be a happy thought.
We are hovering at 34% of net takehome on mortgage, other essential outgoings have increase massively to just under 40% of take home (corners could be shaved here, like no heating, change shopping from tesco to lidl etc,,)
So without the mortgage bump 75% of our takehome goes on essentials. At a mortgage rate of 7% that'll be around 90%.
Up until remortaging to refurb, and the shit hitting the fan we had been tracking quite closely to the 50:30:20 rule - so we were pretty comfortable
One of my mates is on interest only. Obviously hoping for his wealthy parents to pop their cloggs. His father departed last year.
Would a VAT increase be a fairer way of reducing money supply?
its a good idea but VAT disproportionately hits the poor (as a percent of income) and increasing VAT would (I think) actually increase inflation - if you put it from 20-25% most prices would rise by 5%, causing upward pressure on wages (I think) driving another cycle of inflation. I might be wrong about that though.
Interest only whilst looking after family at home, then retire and move to a small place somewhere away from heated house price areas. Need to ensure kiddies leave though!
One of my mates is on interest only. Obviously hoping for his wealthy parents to pop their cloggs. His father departed last year.
Yeah some close friends of ours have always done interest only and currently have a massive house that they are doing up (absolutely no idea what their exposure is). In fact I have posted on here before about them and the general opinion was that, if people on such mortgages are doing something with the saving (saving it, investing it etc) then it's no problem, but if they haven't then it's a very risky position to be in.
Interest only whilst looking after family at home, then retire and move to a small place somewhere away from heated house price areas.
But you'd have to hope the house you sell has increased enough in value to be able to afford to buy a smaller home as you may have very little (if any) equity.
Is anyone else frustrated with the media coverage? The figures of monthly payments rising mean nothing without more context - from the borrower though to national relevance.
https://www.bbc.co.uk/news/business-65966725
1.4 million to see interest rates rise - but only 690,000 to be hit with a 20% drop in living standards.
This from nearly 11million mortgages in the UK.
Of course 20% less to spend when you are struggling to put food on the table each month compared to the wealthier who think 'curses, that eBike will have to wait another year and I cannot afford the winter ski trip'.
(etc)
printing of money in Covid to fund furlough etc
Fail at the first hurdle.
We didn't just start printing money in Covid. It's bullshit. And neither to we print money for this process. It's money marked up in commercial banks accounts by license at the BoE.
New money creation is always used for government spending. Irrespective of Covid. It was income replacement by and large - not additional cash.
The fact that we did Q/E at the same means nothing really.
Why is the nonsense still doing the rounds?
if anyone’s confused, this is the marginal theory of people who subscribe to mmt, and not actually the case. government debt is tracked in an account and managed through (mostly) government bonds.
I can tell you exactly how it works if you want? That's why I referred to the Debt Management Office.
I'm not confused at all.
Government debt is simply a place for private money to go - it serves very little purpose other than that. it funds nothing.
Why is the nonsense still doing the rounds?
I will say it again rone, you have a particular view and theory on our economy. It is a view. Not shared by all.
And yet you state it as fact.
It is a view.
I’m explaining why things are happening the way they are – don’t be so bloody rude.
You are also coming across as rude yourself the way you describe others or the way you are 'speaking' as though others are thick and you know it all. And not just me.
(Albeit some are politicians who I have little respect for regularly.)
And I agree - you have put your point of view across, you now do not need everyone to defer to your position or justify their own views. It is an exchange of views, not a conversion to all seeing the world your way.
The thing is. despite the BOE calling the shots, it the Government who hold sway over the 2% inflation target, the BOE have few tools and don’t get to pick and choose who feels what pain.
The only really solution is to accept higher inflation over a long term… but then they might have to at least accept Brexit is a major cause.
The BoE don't call the shots.
The government could intervene under the BoE act 1998.
"19 Reserve powers.
(1)The Treasury, after consultation with the Governor of the Bank, may by order give the Bank directions with respect to monetary policy if they are satisfied that the directions are required in the public interest and by extreme economic circumstances.
(2)An order under this section may include such consequential modifications of the provisions of this Part relating to the Monetary Policy Committee as the Treasury think fit."
You are also coming across as rude yourself the way you describe others or the way you are ‘speaking’ as though others are thick and you know it all. And not just me.
My additions to this thread were definitely not any sort of personal attack. But I will correct people.
And I agree – you have put your point of view across, you now do not need everyone to defer to your position or justify their own views. It is an exchange of views, not a conversion to all seeing the world your way
You are confusing my view of political economics with how government spending works. One is my view (left-wing etc) and the other is an accurate model of government spending. Stop the conflation and we will get on.
Please put a sock in it, adding nothing to this debate
Whereas that is just ****ing rude.
Anyway where's your counter-point?
(God knows why people are so inflammed that they've been told a Tory lie and refuse to let go of it!)
Rone. You are wedded to an economic theory. One not shared by all economists by along way. You are very shouty about it. Its tiresome
Some of what you say is mainsteam and makes sense. Some of it is very much a fringe tbeory
Rone. You are wedded to an economic theory. One not shared by all economists by along way. You are very shouty about it. Its tiresome
The government spending model as presented is not theory in that sense. It's an accurate model.
And it's more tiresome that despite all the countless examples you never take a blind bit of notice and come back time and time again with the same duff logic.
Some of it is very much a fringe tbeory
Which bit?
It's a thread about interest rates. I'm genuinely concerned where all being taken on a needless ride that doesn't have to happen. I opened my contribution with the idea that 6% base-rates are where the crunch was going to happen - this is a reasoned guess and has nothing to do with MMT.
A few posts up a posted an extract from Parliment documents to show people that the Government can over-rule the BoE because people on here blindly believe otherwise.
I’m not really that into endless politics shouting matches tbh.
But I think you set your tone with
Don’t be ridiculous.
You’ve clearly missed pages and pages of analysis on our threads.
A fascinating definitive guide no doubt.
Fail at the first hurdle.
We didn’t just start printing money in Covid. It’s bullshit.
Another welcoming debating style.
I can tell you exactly how it works if you want?
If carlsberg did mansplainers…
oh and MMT has been saying for the last couple of years lifting interest rates adds to the money supply therefore the price level and inflation.
Surely by raising rates, you're encouraging people to save and thus pay down debt resulting in less new money and less growth. Thus, a smaller economy...assuming you buy the argument that creating debt/money is actually productivity, which unless you're an economist, it really isn't.
If it's all so easy rone then I'm sure Rachel Reeves will be on the phone to the BoE on her first day and have us flooded with money within months.
I'll put down my deposit on a solid gold yacht in anticipation! 🙂
But I think you set your tone with
Well not actually I started way back - before that, but this was in response to someone saying something that was totally incorrect.
Surely by raising rates, you’re encouraging people to save and thus pay down debt resulting in less new money and less growth. Thus, a smaller economy…assuming you buy the argument that creating debt/money is actually productivity, which unless you’re an economist, it really isn’t.
Well there are more people in debt than with savings for a start. And those type of people tend to be affluent so you're effectively taxing the poorer person with a mortgage debt and giving money to those that hold assets.
If it’s all so easy rone then I’m sure Rachel Reeves will be on the phone to the BoE on her first day and have us flooded with money within months.
I’ll put down my deposit on a solid gold yacht in anticipation! 🙂
Well she's ex BoE so doubt very much she wouldn't toe the line.
I don't think any of this easy - as there are always problems in balancing the economy - but you can ask what are we prioritising? The Tories don't prioritise those struggling do they or public services etc.
With interest payments - that interest income goes somewhere (bond holders/savers etc) - in the US current it is equivilent to a large government deficit and currently powering there economy. The wrong targets perhaps.
There's a huge distinction between government 'debt' and private debt to factor in.
If carlsberg did mansplainers…
Your contribution is what to this debate?
And it’s more tiresome that despite all the countless examples you never take a blind bit of notice and come back time and time again with the same duff logic.
Thats pretty laughable considering the only comment i ever make on economics is to point out that MMT is a theory not a set of facts and that its not universally accepted
Thats pretty laughable considering the only comment i ever make on economics is to point out that MMT is a theory not a set of facts and that its not universally accepted
We call it a description. That can be what theory means.
Nothing is universally accepted is it? The thing that we currently 'accept' is sure working out well for us isn't it?
But yeah - tell me what wrong with the model/description?
To paraphrase a post of mine from several months ago...
MMT is heterodoxy and unless/until it is accepted by Gov/BoE as orthodox it will remain a relatively fringe theory - Richard Murphy's views notwithstanding.
Getting all shouty about it won't change anything - and don't forget that this is an internet forum which has absolutely no impact on what happens in the real world.
Back on topic - I'm mortgage free so my focus is (probably) different to most posters in that my objective is maximising returns from savings/investments andhelping my children secure the best possible
re-mortgage deals.
MMT is heterodoxy and unless/until it is accepted by Gov/BoE as orthodox it will remain a relatively fringe theory – Richard Murphy’s views notwithstanding.
Still doesn't not make it the current model - still let's pretend that they didn't spend 350Bn of new money then during covid! Lol.
Nothing I have put forward or MMT proponents put forward - Murphy would not disagree with. His own work shows all the stuff we're discussing.
Maybe not a popular view, but some additional taxation would affect peoples spending power in a similar way to increased mortgage payments and allow a reduction in government deficit. Drop the additional rate to say 60k.
Rone
I refer the right honourable gentleman to the answer I gave before.
Rone
I refer the right honourable gentleman to the answer I gave before.
Shrug. Can't help with that one. Just simply ignore the pandemic spending as if it didn't happen then.
if you put it from 20-25% most prices would rise by 5%, causing upward pressure on wages (I think) driving another cycle of inflation
I don't understand why this argument doesn't apply to mortgage costs though. Do they think people are looking at £1000's increase in mortgage and not thinking "man I need a payrise". All it's doing in my mind is transferring money from normal people into the hands of the banks. Money trickles upwards as ever with this gov.
Maybe not a popular view, but some additional taxation would affect peoples spending power in a similar way to increased mortgage payments and allow a reduction in government deficit. Drop the additional rate to say 60k.
I think that some added taxation, not least a re-valuation of all houses for Council Tax and an extending of Council Tax Bands is a good start.
We have a neighbour in a 5-bedroom detached and extended bungalow with large garden - on same Council Tax banding as our 3-bed semi of about half the floor area and value. And both of us are two council tax bands lower than the brand new 'social housing' in the next village, which of course have been valued on 2023 valuation.... We need Council Tax bands to take house values up to £2m into consideration - and an evening out of many other people, while also leveraging some more tax and slowing spending. Plus of course this would go into council coffers, where I think the money is more needed.
All it’s doing in my mind is transferring money from normal people into the hands of the banks. Money trickles upwards as ever with this gov.
That's exactly what is happening.
But the government set in the minds of people at one point this was driven by demand - you've only got to look at growth over the last few years. Sure there has been demand in some sectors but mostly supply chain / energy driven inflation - which is why raising rates is the last kill for this lot.
Income interest gets paid to someone. So that money has to go somewhere.
. Plus of course this would go into council coffers, where I think the money is more needed.
Absolutely - local council's are fiscally constrained.
All it’s doing in my mind is transferring money from normal people into the hands of the banks. Money trickles upwards as ever with this gov.
That’s pretty much what Martin Lewis has been saying today. The banks are repeatedly raising rates for loans and mortgages but not doing so for savers rates.
It’s just flagrant profiteering. Expect banks to post vast profits on the back of this, same as the energy companies
We don’t have a mortgage. We rent and our landlord has just put our rent up significantly as his mortgage has massively increased. All other rents in the area will have been hiked by the same rate, I’m sure.
Hey - so let's all push back against this economic bullshit then Binners?
The banks are repeatedly raising rates for loans and mortgages but not doing so for savers rates.
Well yeah! And then the government want to blame the workers for too much spending. PMSL.
So perhaps - just perhaps raising interest rates doesn't serve most of us!
It will be interesting to see what effects the rent freeze and better protection for tenants has in Scotland on the rental market. Can't put the rent up and can't evict without fault unless you are selling and then its 6 month notice
There is some get out clause for landlords in serious financil trouble I think.
Will rentals go down in resale value ?
Rone - I can’t imagine it serves anyone other than bank shareholders
I’ve not said anything otherwise so no need to get shouty with me
I get it that it’s just your default to just wade into everyone with your usual tiresomely condescending and hectoring tone, but maybe reign it in a bit eh?
But you’d have to hope the house you sell has increased enough in value to be able to afford to buy a smaller home as you may have very little (if any) equity.
Well hard to imagine no equity built up over a 35 year period, or whatever, even with just matching inflation; but yeah, worth building up savings as well just maybe don't worry about not having enough to pay off the mortgage. I haven't needed to take this approach, helped by buying in '96, but perhaps it's an approach for some younger people.
As always, yet another initially interesting thread gets derailed...
I’ve not said anything otherwise so no need to get shouty with me
I wasn't at all. Just having a bit of comradeship! Touchy as - dude.
I get it that it’s just your default to just wade into everyone with your usual tiresomely condescending and hectoring tone, but maybe reign it in a bit eh?
And here's me thinking that's exactly how you conduct your business in plenty of threads too. But yeah I let it wash mostly.
Nice one.
I also think there should be some regulation on how much banks can make from mortgages. It should be cost to serve + margin. When interest rates are super low I can see how banks can't make much money on the debt (though the scale of lending means its would still be profitable). A flat +XX% over base for an SVR seems like profiterring - as the numbers loaned get bigger and the rates increase the amount of profit for the bank increase to on an upward curve. SVR numbers now are ridiculous compared to the past and shouldn't be allowed.
(I maybe being super daft and picked up the wrong end of the stick, which is entirely possible!)
Great. Another thread to avoid as one of the usual suspects does his usual thing
*sigh*
Fine crack on.
It will be interesting to see what effects the rent freeze and better protection for tenants has in Scotland on the rental market. Can’t put the rent up and can’t evict without fault unless you are selling and then its 6 month notice
Indeed.
Guess why I bailed out a year ago - the writing was on the wall.
I agree that interest rates cannot be the only tool that BofE and Government has to partially control our economy. Taxes have to be considered.
Nor do I think we should base big decisions on how to run the economy based on the size of mortgage increases for a wealthier that most minority.
Both the above doesn't mean I don't have huge compassion for people faced with these rises.