ISER says impact of interest rate rises limited

wotsthat

Thrugelmir wrote: »

I'm surprised that you interpret them as being "positive". Over time the issues raised will need to be addressed. As its no illusion.

What's not positive about 'ISER says impact of interest rate rises limited'?

julieq

We've been here before on the yougov research.

It's about arrears in all housing costs, not just mortgages. People paying rent have a lower spread of income than people paying rent, and also pay more on average for a given class of accomodation, and it's more likely that someone is in rental is in arrears. Shelter are very careful not to publish the breakdown of data between rented and mortgaged housing, but obviously this information is implicit in data provided to both surveys by lenders, so the more recent specific survey is going to be more accurate.

And Shelter specifically do not say that interest rates are the trigger, they say only that some people have difficulty paying housing costs (which is inevitable where supply far outstrips demands). In fact they are keener to point out that "every 2 minutes someone faces losing their home". It's a partisan piece in other words and they're deliberately using emotive language to raise awareness and funds.

If you fully deconstruct the numbers, and I think I went and found the original report last time round, it's a piece about the increasing cost of rental.

It's not necessary to say this to find the flaws in the report, but Yougov is not a well regarded organisation as I understand it. Their surveys are I believe paid and online, and so there's a degree of self selection from people wanting to earn small amounts of money online which excludes quite a section of the population. They claim to correct for data skew but it's not a particularly convincing claim.

Thrugelmir

RenovationMan wrote: »

I'm not sure how this relates to your original statement, but are you trying to say that people who bought a house within the last 16 years are more at risk of losing it because they have not gone through a recession before?

All I can say in response is that the people who ran the country (Labour) definitely had seen recessions before but still did nothing at all to protect us from this one. I believe the oft used phrase 'they didn't repair the leeky roof while the sun was shining' applies here.

With that in mind, it seems that even recession/downturn veterans can quickly forget the bad times when the good times roll in, so perhaps it's not so cut and dried that Older people = Good with money, Young people = Bad with money?

Not at all. Repossession is primarily triggered by loss of job/income. A different situation to struggling to meet the payments if base rate rises to 5%. As this means possibly making considerable sacrifices in lifestyle just to survive.

According to the FSA, 43% of all outstanding mortgage stock is currently on an interest only basis (published in CP/016). The bulk of these mortgages come to the end of their contract term between 2024 and 2033. With a considerable % of these borrowers believed to have no vehicle in place to repay the capital balance in its entirety.

So be interesting to see what the forthcoming FSA mortgage market review brings. As while there is nothing wrong with interest only mortgages as such. There are real issues for a significant number of borrowers who will be suffering from a reduction in disposable income even before interest rates rise.

blueboy43

Graham_Devon wrote: »

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

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.

But Shelter are a campaigning charity and have a clear agenda.
It doesn't matter who they use as pollsters, they will start with a desired end-point and work with the polling organisation to frame and word the questions.
This is why polling organisations exists - they provide a veneer of respectability to orgainisations & political parties.
Probably the only time they are truly independent & statistically reliable is when they do the general election exit polls.

The rest of the time they are paid to get a desired result.

Not sure who IFESR are and whether they are similar - but I would beware any press release Shelter put out.

blueboy43

Thrugelmir wrote: »

According to the FSA, 43% of all outstanding mortgage stock is currently on an interest only basis (published in CP/016). The bulk of these mortgages come to the end of their contract term between 2024 and 2033. With a considerable % of these borrowers believed to have no vehicle in place to repay the capital balance in its entirety.

Wow - thats amazing, would have fine in the days of roaring inflation but not these days.

StevieJ

Thrugelmir wrote: »

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.

I thought they had all mewed their equity away.

StevieJ

blueboy43 wrote: »

Wow - thats amazing, would have fine in the days of roaring inflation but not these days.

It is not that different to having one of those endowment mortgages, repayment vehicle in name only in the end

chucky

Thrugelmir wrote: »

According to the FSA, 43% of all outstanding mortgage stock is currently on an interest only basis (published in CP/016). The bulk of these mortgages come to the end of their contract term between 2024 and 2033. With a considerable % of these borrowers believed to have no vehicle in place to repay the capital balance in its entirety.

So be interesting to see what the forthcoming FSA mortgage market review brings. As while there is nothing wrong with interest only mortgages as such. There are real issues for a significant number of borrowers who will be suffering from a reduction in disposable income even before interest rates rise.

do you think these mortgages might have a repayment vehicle?

Graham_Devon

blueboy43 wrote: »

But Shelter are a campaigning charity and have a clear agenda.
It doesn't matter who they use as pollsters, they will start with a desired end-point and work with the polling organisation to frame and word the questions.
This is why polling organisations exists - they provide a veneer of respectability to orgainisations & political parties.
Probably the only time they are truly independent & statistically reliable is when they do the general election exit polls.

The rest of the time they are paid to get a desired result.

Not sure who IFESR are and whether they are similar - but I would beware any press release Shelter put out.

Ok....

Well have the CML then....

Many mortgage holders risk losing their homes as a quarter admit being unaware that interest rates are currently at a record low, and therefore are not prepared for any rate rises.
One in four UK homeowners said they didn’t know that interest rates are currently at a 300-year low, according to research by the Council of Mortgage Lenders (CML).

julieq

Graham, 1 in 4 UK homeowners not knowing about interest rates doesn't mean ANYTHING AT ALL about their ability to pay or not pay their mortgage.

To be honest I don't know for certain that the rates are lower than any time in the last 300 years, and if anyone asked me that question I'd say I didn't know too. People don't have their finger on 300 years of interest rate history. And even had the question been asked about 50 years a fair few people wouldn't be certain.

It's a ridiculous extrapolation from that statistic that people are not prepared for base rate rises in the sense of not being able to afford them. And the very fact someone is prepared to make a headline out of that non-statistic shows that there isn't anything remotely more convincing about to support the assertion that rising rates will cause carnage.

Why do the CML want people to worry about rates? Because they want people off unprofitable trackers and onto long term fixed rates. Bears are quick to notice VIs on anything they don't like, but not so vigilant on the other side of the equation.