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  • FIRST POST
    • vmp
    • By vmp 9th Jan 18, 6:20 PM
    • 37Posts
    • 6Thanks
    vmp
    Could you afford your mortgage under a Corbyn government?
    • #1
    • 9th Jan 18, 6:20 PM
    Could you afford your mortgage under a Corbyn government? 9th Jan 18 at 6:20 PM
    I'm currently midway through a 5 year fixed rate mortgage and with the possibility of Corbyn rising to power I'm thinking about what could happen.


    If we disregard Blair and Brown (generally regarded as centrist, with Thatcher describing Blair as her "greatest achievement"), the most recent Labour government was James Callaghan between 1976-1979.


    During this time, the Bank of England base rate peaked at 15%.


    My mortgage payments are currently about £1,400 a month.


    If interest rates were at 15%, they would increase to about £3,900 a month according to the MSE mortgage rate calculator: https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator#results


    Frankly, I can see no other outcome to this than my house being repossessed.


    How would everyone else get along?
Page 2
    • ValiantSon
    • By ValiantSon 10th Jan 18, 10:11 PM
    • 209 Posts
    • 194 Thanks
    ValiantSon
    Interesting. Care to elaborate?
    Originally posted by vmp
    Where to begin? (I normally charge £60 p/h for private tuition, but for you here's a freebie):

    1) The interest rates you quoted originally are very selective re: Callaghan. Rates cotinued to be very high under Thatcher (a Conservative), with a slow decline upto 1984 when they began to rise again, reduce a little between 1986 and 1988, and then rise again to 1989. The problem of high interst rates continued under her (mis)management of the economy and into the prime ministership of Major (although reducing). Double digit interest rates existed for a very large proportion of Thatcher's time in power.

    2) There is no valid evidence that Labour governments manage the economy particularly badly. Also, govenrments only have a limited impact on the economy, especially in an increasingly globalised world where (in develeoped countries) currencies are fiats.

    3) Governments are constrained by the a wealth of diferent factors, including (but not limited to) the position taken by businesses and markets; the ability to act due to treasury receipts; the ability to act due to parliament; the ability to act due to civil service advice and capaity; the attitudes of trading partners and other global actors.......

    Actually, I know. Corbyn is often praising Venezuela; it's a "socialist paradise", an "inspiration".

    Perhaps we should look towards Venezuela for guidance?

    Interest rates there are currently around 21%.

    How would you fare with your mortgage repayments with interest rates at 21%. Better?
    Originally posted by vmp
    No problem for me. Paid the mortgage off (and I am well under 60).

    That isn't really the point though. There is absolutley no reason to assume that interest rates would rise to 21%. You are presenting a straw man argument full of formal fallacy.

    Or are they not around 21% in Venezuela, and that's another conspiracy of the "right wing press"?
    Originally posted by vmp
    See above.
    • Crashy Time
    • By Crashy Time 18th Jan 18, 11:03 AM
    • 5,380 Posts
    • 2,236 Thanks
    Crashy Time
    They will never go up to 15% though. Why would the BoE intentionally put millions of people with unaffordable debt?

    Back in the 80s and 90s, houses were much more affordable than they are now, so the comparison is fairly irrelevant.
    Originally posted by NineDeuce

    The BOE just follow the Fed, I think the historical data shows that clearly? The thing to think about though is why were houses so much more affordable back then, yes there was some wage inflation, but higher rates/tighter lending tamed the market as well. High house prices are a blip not a norm.
    • Voyager2002
    • By Voyager2002 18th Jan 18, 11:41 AM
    • 11,817 Posts
    • 8,005 Thanks
    Voyager2002
    I'm currently midway through a 5 year fixed rate mortgage and with the possibility of Corbyn rising to power I'm thinking about what could happen.


    If we disregard Blair and Brown (generally regarded as centrist, with Thatcher describing Blair as her "greatest achievement"), the most recent Labour government was James Callaghan between 1976-1979.


    During this time, the Bank of England base rate peaked at 15%.


    My mortgage payments are currently about £1,400 a month.


    If interest rates were at 15%, they would increase to about £3,900 a month according to the MSE mortgage rate calculator: https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator#results


    Frankly, I can see no other outcome to this than my house being repossessed.


    How would everyone else get along?
    Originally posted by vmp
    I think you need to look more carefully at your history...

    The 1970s was a period of very high inflation across all Western countries (some people blame the amounts the US government borrowed for the Vietnam war; some blame the dramatic increases in oil prices...). The conventional way to control inflation is to put up interest rates, and so this happened across all major market economies, no matter whether their governments were left- or right-wing. And bear in mind that for much of this period wages and general incomes were keeping up with inflation, so the pain was limited. Of course home-owners saw the real value of their outstanding mortgages shrink drastically, so it was not all bad...

    Whatever you think about Corbyn, he is unlikely to cause the US government to borrow to such an extent that they have to do something like abandoning the gold standard (stopping linking the dollar to the value of gold, which is what Nixon did). Nor do I expect him to organise a cartel of oil producers and encourage them to quadruple the prices they charge: that is what we saw with the emergence of OPEC.
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