ISER says impact of interest rate rises limited

michaels

Apologies if this has already been posted but in the BBC article on falling real wages there are two charts showing the impact on the numbers with 'difficulty keeping up with the mortgage' and '2 months in arrears' under different interest rate scenarios.

The headline numbers were:
Current rates, 659k struggle and 117k in arrears
%% BBR, only another 179k struggle and 17k more in arrears

http://news.bbc.co.uk/panorama/hi/front_page/newsid_9436000/9436026.stm

I know this will make Hamish cream his pants and it is only one survey but I was really surprised at the small impact anticipated.

Kohoutek

The charts in question

Graham_Devon

It's interesting research.

There was another place that did some research on this...think it was shelter?

The results were wildly different to this research if I recall correctly. Makes you wonder how people measure such things.

Thrugelmir

michaels wrote: »

I know this will make Hamish cream his pants and it is only one survey but I was really surprised at the small impact anticipated.

A base rate of 5% has minimal impact on people who bought over 15 years ago and are in the last 10 years of their mortgage term. Compared to more recent borrowers who appear to be struggling whatever the base rate. As the sheer size of their mortgage debt is dragging them down.

chucky

RenovationMan wrote: »

Shelter's surveys are notoriously inaccurate. They hang around shopping centres to do the surveys and so, not surprisingly their respondents are not going to be busy workers dashing to/from the office or grabbing lunch. Lets face it, we all know the demographic that is going to be loafing around shopping malls with the time or inclination to do a shelter survey...

Their figures are therefore skewed from the outset and they then extrapolate this small research pool of a few hundred to represent the population of the UK.

seeing that over 50% of shelters funding comes from donations it isn't a surprise that their surveys appeal to people's emotions instead of being accurate.

shelter should really focus on what they're good at instead of surveys taken from people at shopping centres.

Thrugelmir

RenovationMan wrote: »

I didnt see that information reflected in the data supplied. Do you have a link?

Simple logic. Average price of a house in 1996 was £71k. So even with a repayment mortgage of 100%. The capital balance outstanding on the mortgage is now £42k in 2011. So a base rate rise has a fairly minimal impact. Even more so for those with a lower mortgage balance.

Graham_Devon

RenovationMan wrote: »

Shelter's surveys are notoriously inaccurate. They hang around shopping centres to do the surveys and so, not surprisingly their respondents are not going to be busy workers dashing to/from the office or grabbing lunch. Lets face it, we all know the demographic that is going to be loafing around shopping malls with the time or inclination to do a shelter survey...

Their figures are therefore skewed from the outset and they then extrapolate this small research pool of a few hundred to represent the population of the UK.

Well, it's not quite as bad as that!

Just looking at their recent press releases, they have used Yougov, FSA data, CML data, amd mortgage company data.

HAMISH_MCTAVISH

michaels wrote: »

I was really surprised at the small impact anticipated.

Why?

A lot of posters here have been pointing this out for a very long time.

The vast majority of people could pay the mortgage with base rates at nearly 6% in 2007, and they could pay it today if they had to.

This research only confirms that.

Graham_Devon

Heres the shelter research. And it is yougov. Whether that simply negates the research or not, is down to individual thoughts on the subject. However, yougov is used for a wide variety of research.

http://media.shelter.org.uk/Press-releases/SHELTER-WARNS-OF-RISE-IN-HOMELESSNESS-AS-MILLIONS-STRUGGLE-TO-PAY-FOR-THEIR-HOMES-36d.aspx

Results from a YouGov survey of over 2,000 Britons found the equivalent of 835,000 households (3%) admit to being in arrears with their rent or mortgage, compared to 405,000 households (2%) last October.
Worryingly, households with children are most at risk (5%). Shelter estimates that more than 480,000 children are currently living in families that are falling behind with their basic housing costs.
The survey also showed increasing numbers of people fighting to stay afloat, as 3.7 million households (15%) said they constantly struggle to pay their rent or mortgage, an increase of almost double since October last year (8%).

I guess you have to choose the survey your personal thoughts most align to and go with that. None of them are right, or wrong.

michaels

OK, to put it another way, way is the BoE so terrified about raising rates if it won't kill the economy through the housing market? After all given the disconnect between other lending rates and the base rate it is hardly going to make much difference to a 29.9% apr unsecured loan or credit card...

HAMISH_MCTAVISH wrote: »

Why?

A lot of posters here have been pointing this out for a very long time.

The vast majority of people could pay the mortgage with base rates at nearly 6% in 2007, and they could pay it today if they had to.

This research only confirms that.

ILW

HAMISH_MCTAVISH wrote: »

Why?

A lot of posters here have been pointing this out for a very long time.

The vast majority of people could pay the mortgage with base rates at nearly 6% in 2007, and they could pay it today if they had to.

This research only confirms that.

So lets bang rates up to 6%, would help my savings.