Mortgage Interest Rate Increases

jbiwtt7

Financial institutions which have been bailed out with public funding should not be allowed to increase mortgage interest rates once the base rate rises.

Hiking interest rates beyond affordability levels would substantially increase the number of defaults and therefore the number of people made homeless by repossessions.

Amendment, following discussion with other members, for further clarification
I am talking about institutions such as Northern Rock for instance whose customers have seen very little benefit from base rate changes, maybe 0.5% - 1% decrease in total.

I believe that their interest rates should not be allowed to increase until they are in line with the average rates offered by all other financial institutions which offer competitive interest rates. That is to say that they should not be allowed to profiteer at the risk of people losing their homes, not through lack of financial planning but through extortionate rate increases out of line with other financial institutions.

Keeping rates at a reasonable levels would ensure lower level of defaults and therefore recuperation of public money.

Increasing rates would effectively mean the public paying twice, once for the original bail out and secondly when the loan is defaulted and the home repossessed, not to mention the subsequent housing of these individuals and the social impact this will undoubtedly have, which you guessed it we are going to be paying for again, and again and again.

Thrugelmir

jbiwtt7 wrote: »

Financial institutions which have been bailed out with public funding should not be allowed to increase mortgage interest rates once the base rate rises.

Hiking interest rates beyond affordability levels would substantially increase the number of defaults and therefore the number of people made homeless by repossessions.

Keeping rates at a reasonable levels would ensure lower level of defaults and therefore recuperation of public money.

Increasing rates would effectively mean the public paying twice, once for the original bail out and secondly when the loan is defaulted and the home repossessed, not to mention the subsequent housing of these individuals and the social impact this will undoubtedly have, which you guessed it we are going to be paying for again, and again and again.

As a taxpayer why should I subsidise your mortgage?

Savers outnumber borrowers by 7 to 1.

beecher2

Thrugelmir wrote: »

As a taxpayer why should I subsidise your mortgage?

Savers outnumber borrowers by 7 to 1.

Exactly my thoughts. The Halifax's SVR is at 3.5% - if people can't afford base rates increases of at least 3 or 4% then something's very wrong with their finances, and subsidising them isn't going to help one bit.

There's a wider argument to be made about the lack of social housing, and the general feeling amongst the general public that they have a right to own their house whether they can afford it or not, but that's not what is being stated here.

jbiwtt7

beecher2 wrote: »

Exactly my thoughts. The Halifax's SVR is at 3.5% - if people can't afford base rates increases of at least 3 or 4% then something's very wrong with their finances, and subsidising them isn't going to help one bit.

There's a wider argument to be made about the lack of social housing, and the general feeling amongst the general public that they have a right to own their house whether they can afford it or not, but that's not what is being stated here.

I am not talking about financial institutions who have seen their SVR plummet to all time low levels with base rate changes, but those that have remained above average despite these decreases and which could potentially increase well beyond average levels and therefore become unaffordable when levels return to normal compared to those which follow the base rate changes more faithfully.

jbiwtt7

Thrugelmir wrote: »

As a taxpayer why should I subsidise your mortgage?

Savers outnumber borrowers by 7 to 1.

As a tax payer where do you expect any extra funding to come from when peoples homes are repossessed and they need rehousing?

I am a tax payer too, I don't want to see my tax payments increase for an avoidable reason.

I'm not asking for my mortgage to be subsidised. I am happy to pay back my borrowings and would not consider defaulting on my payments unless there were circumstances completely beyond my control.

I want to raise awareness of the effects of increasing interest rates not just for sub-prime mortgages but for mortgages in general. I'm no politician or monetary expert at the bank of england, and this is probably a very simplistic view.

I suppose I want to create enough debate and discussion so that something actually gets done to change things in a way that benefits everyone.

I want people to stand up and be counted. I don't want to watch this country go down the pan.

Thrugelmir

jbiwtt7 wrote: »

I am not talking about financial institutions who have seen their SVR plummet to all time low levels with base rate changes, but those that have remained above average despite these decreases and which could potentially increase well beyond average levels and therefore become unaffordable when levels return to normal compared to those which follow the base rate changes more faithfully

There's no certainty that they will maintain such a margin over base rate.

Progressively the artificial stimulus will be removed from the banking system. As it does the markets will normalise and the major lenders will fall back into line with each other.

Thrugelmir

jbiwtt7 wrote: »

As a tax payer where do you expect any extra funding to come from when peoples homes are repossessed and they need rehousing?

I'm not asking for my mortgage to be subsidised. I am happy to pay back my borrowings and would not consider defaulting on my payments unless there were circumstances completely beyond my control.

I want to raise awareness of the effects of increasing interest rates not just for sub-prime mortgages but for mortgages in general. I'm no politician or monetary expert at the bank of england, and this is probably a very simplistic view.

I suppose I want to create enough debate and discussion so that something actually gets done to change things in a way that benefits everyone.

I want people to stand up and be counted. I don't want to watch this country go down the pan.

Rent. To put it bluntly.

House prices may fall. But as in any market there'll always be buyers to pick up the pieces. As the demand is there.

In my opinion. The property market needs a major correction. Though not now in the middle of a recession. Also the BOE's current actions in stabilising the banking system first take a higher priority.

beecher2

jbiwtt7 wrote: »

I am not talking about financial institutions who have seen their SVR plummet to all time low levels with base rate changes, but those that have remained above average despite these decreases and which could potentially increase well beyond average levels and therefore become unaffordable when levels return to normal compared to those which follow the base rate changes more faithfully

Which lenders are you talking about specifically? Off the top of my head, I'd think most of, if not all of the banks which were bailed out have below average SVRs. The 'norm' for an SVR is probably around 7% - anyone who can't afford this rate is in serious trouble but I'm not sure they should be subsidised.

[Deleted User]

jbiwtt7 wrote: »

Financial institutions which have been bailed out with public funding should not be allowed to increase mortgage interest rates once the base rate rises.

Keeping rates at a reasonable levels would ensure lower level of defaults and therefore recuperation of public money.

If bailed out financial institutions are not allowed to increase mortgage rates then they will need to be bailed out again - Double Whammy!
Keeping rates lower would therefore result in a lower chance of recouping public money not a higher chance.

jbiwtt7

With respect to your opinions I should perhaps amend that original statement and further clarify it.

I am talking about institutions such as Northern Rock for instance whose customers have seen very little benefit from base rate changes, maybe 0.5% - 1% decrease in total.

I believe that their interest rates should not be allowed to increase until they are in line with the average rates offered by all other financial institutions which offer competitive interest rates. That is to say that they should not be allowed to profiteer at the risk of people losing their homes, not through lack of financial planning but through extortionate rate increases out of line with other financial institutions.

So although they might not make as much money they would reduce the risk of defaults and repossessions.

Gorgeous_George

The institutions that needed bailing out did so because so many of their borrowers are wuckfits who borrowed too much (up to 125%) against an over-valued product.

This increased risk is partially reflected in the higher rates that they NEED to charge to borrowers.

If my lender kept rates artificially low I wouldn't bother paying the debt off. Instead I would save with other institutions who were able to offer better savings rates.

The customers of those (sub-prime lenders) that needed bailing out who cannot move to a lender with lower rates probably contribute less in taxes than the (indirect) benefits they have received from the bailout.

GG