One in Five could not afford food if payments rise

homelessskilledworker

http://www.telegraph.co.uk/finance/personalfinance/9238464/One-in-five-couldnt-afford-food-if-mortgage-payments-rose.html

According to research by Which?, the consumer group, 70pc of mortgage-holders are concerned about an increase in interest rates. More than a million home owners will see the cost of their mortgage payments increase today as several lenders raise standard variable rate (SVR).

Three quarters of mortgage-holders told the group that they would be affected if their repayments increased by £50 a month, with 41pc saying they would need to cut back on regular spending, 20pc reducing savings and 11pc not having enough for essentials.

An increase of £100 a month would see 20pc of mortgage-holders not having enough for daily essentials such as food and 11pc being unable to pay their mortgage. Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as "devastating" and "a disaster".

homelessskilledworker

I am not sure how they could do this(not sure who THEY are even), but the poorest 50% of mortgage holders need to be paying 50% less than they do now, and that goes for the rental side as well.

There is some real pain happening out there right now, bear and bull arguments are becoming less important by the day, you would have to be living in Outer Mongolia or Thailand to not see what is happening in the UK today.

People are suffering badly

paulmapp8306

Indeed - but its less to do with mortgage payments or rent IMO. Its more to do with Gas/Electric price rises which are 3 times the average wage rises. Of course anything going up is an issue if your already tight - but you cant blame one thing.

Mortgage rates cant really be blamed IMO - as anyone who thought interest rates would stay as low as they have been even IF the base rate didnt change are in cloud cookoo land. if your not going to be able to live with higher rates - best sell you house now.

the_flying_pig

I've thought for a long time that all residential mortgages should be on a fixed interest, full repayment, basis. The upside's obvious and I can't really see a downside.

IronWolf

If people can't afford the mortgage even if rates are still at historically very low levels, then they have over-extended themselves, and bear some of the blame.

If they can't afford it, they need to sell up and move house.

chucky

IronWolf wrote: »

If people can't afford the mortgage even if rates are still at historically very low levels, then they have over-extended themselves, and bear some of the blame.

If they can't afford it, they need to sell up and move house.

I think I'm saying the same thing as you but would add that it's not just that people can't afford their repayments or have over extended themselves but their disposable income is being squeezed due to over extending their spending elsewhere or they could even be earning less. I don't think it's housing costs exclusively that are causing problems to these 1 in 5 people.

michaels

Well it is hard to afford the mortgage and food after paying for the essentials like sky+ and an iphone contract.

RenovationMan

the_flying_pig wrote: »

I've thought for a long time that all residential mortgages should be on a fixed interest, full repayment, basis. The upside's obvious and I can't really see a downside.

Lack of competition in the mortgage market, resulting in the largest lenders pushing out smaller or niche lenders and forming a cartel to dictate mortgage rates to the benefit of the lender and the detriment of the borrower?

Lack of flexibility for those who manage their mortgage as capably as they manage their other savings and investments and are seeking the most tax efficient way to structure their finances?

There's two downsides right off the top of my head.

wotsthat

Three quarters of mortgage-holders told the group that they would be affected if their repayments increased by £50 a month, with 41pc saying they would need to cut back on regular spending, 20pc reducing savings and 11pc not having enough for essentials.

Some of these surveys really are crap. Have 25% of mortgage holders really told Which that if their mortgage went up by £50 they'd be unaffected and wouldn't need to cut back on spending, reduce saving and would continue to have enough to spend on essentials?

What are they going to do? Magic £50 out of thin air?

An increase of £100 a month would see 20pc of mortgage-holders not having enough for daily essentials such as food and 11pc being unable to pay their mortgage. Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as "devastating" and "a disaster".

I'd take this with a pinch of salt too. It's one thing saying you wouldn't be able to afford essentials or the mortage if it went up by £100 and quite another in practice. In reality the number affected would be smaller as people were forced to take a cold hard look at what they were earning and spending.

On a typical mortage (c£100k - not the £200k used by the BBC to exaggerate the effect of the SVR increases) £100/ month is equivalent to a mortgage rate increase of 1.25%. It's not much so anyone in this boat should be doing something about it now. Makes you wonder what they've been doing for the last three years.

paulmapp8306

I like the idea personally. You have payments you can afford - and that wont shock you down the line. The offset is the inability to manage.

Id say that theres room to add a "lifetime fixed rate" mortgage options to the market rather than being the only one available. Personally, Im getting a 3.79% fixed rate (because its only .3% more than a tracker and costs £15/month for essentially an insurance policy against base rate changes) BUT if I was offered a lifetime fixed rate at around 4.5% it take it for sure. The issue would be the rate that kind of mortgage would be. If its nearer 6% then I wouldnt takle it.

ILW

Anybody who is that close to the edge with rates where they are at the moment, really does need to re-evaluate whether they can truly afford to be buying the house they are in.