People will adjust their spending habits in order to afford their mortgage

nicko33

Graham_Devon wrote: »

not many will actually have gym memberships

In the UK, 5.2 million adults have membership of a private gym.
Market of £2.5bn

http://www.guardian.co.uk/commentisfree/2011/jan/05/gym-genius-con-exercise-hungry

average £40 per month
now, how to convert 5.2 million adults paying £40 to an average household

UK population about 63.2 million
about 11 million children (haven't found a good source)
so (handily) about 52 million adults

so average adult pays £4 month on gym membership

2.36 people in the average household
http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-278923
about 52/63 of which are adults
so 1.95 adults per household

so about £7.80 on gym for the average household
(phew)

ash28

Graham_Devon wrote: »

Not sure of the student loan bit, but it would give you a net of 26,617 after NI and income tax.

Of course that doesn't take account of pension contributions and any student debt.

If you add in a pension contribution of 8%, (the average UK contribution is apparently 9.7% according to the beeb) you get a net of £24,377.

Which is kind of why I ask the question of what could be cut back in order to save that amoutn of money per year. As I say, it's said a lot, but the detail is never really considered. Martin Ellis was so blase about it, and then the BBC just cut off the video, so I never got passed his comment of how people would simply adjust.

According the to Pensions Policy Institute using figure from the ONS the average combined (employer and employee) contribution for defined contribution is 9.4% with the average employee contribution of 2.8%. For defined benefit the average combined contribution is 14.2% with average employee contribution of 4.9%.....

https://www.pensionspolicyinstitute.org.uk/default.asp?p=89

Using the 4.9% as contribution you get a take home salary of £2138 a month or £25,657.

Using your figures it would leave £357 a month......not quite so dire.

Can I give you an example of what some people have done.....my daughter and her partner bought a house in 2007 with a £180k mortgage - interest only. They were on a fix with the Nationwide of 7% and paid over a £1000 a month interest - they are now on the Nationwide BMR of 2.5% and still pay over a £1000 a month and in the last 4 years or so have paid off getting on for £40k of their mortgage balance.

They say they will continue like this - paying an extra £700 or so a month until rates start to rise and then they will go for a repayment mortgage. Low interest rates have been a blessing for them as they did max themselves out in the beginning.

My sister has knocked 5 years off her 15 year mortgage by doing the same thing and it will finish in 4 years time instead of 9.

grizzly1911

ash28 wrote: »

Well then go to the library and use it for free - plenty do.

If you have a convenient one or don't have to pay £5+round trip on abus or get in the car.;)

ash28

grizzly1911 wrote: »

If you have a convenient one or don't have to pay £5+round trip on abus or get in the car.;)

I know.....we don't have a library at all but have a mobile library once a week and we don't even have a bus service...........

I was only winding GD up.

Percy1983

I only have £12 phone and broadband and £7 phones contracts I could cancel (don't drink or smoke either), with that I would absorb my mortgage payments doubling so no real problem.

Anyway as great as it is to just cut back what about those who aren't wasting money so can't cut back.

Deangelo

grizzly1911 wrote: »

8 kids in a 2 bed property was normal back in the 20/30s.

Yes I can see it becoming normal again all over the UK. Freeing up lots of supply and getting rid of lots of demand.

So the argument seems to be on the one side the property bears are saying that prices are so high people can only just afford housing costs. As incomes go down with future cuts to Tax credits/child benefit housing benefit and all when universal credit replaces them all, the bears say this will put downwards pressure on property because they are already at their high limit what people can afford.

the prop bulls seem to say people will just have to spend less on other things as housing costs go even higher than their highest limit what can be afforded. I say in many cases this is already the case, all those on one meal per day due to all their money going on housing costs.

I say to the prop bulls that the free market does not work like that. Things always correct in time. Either average incomes go up a lot (unlikely) or property costs (rent and house prices) will come down over the next few years as the cuts start to bite.

nicko33

Percy1983 wrote: »

Anyway as great as it is to just cut back what about those who aren't wasting money so can't cut back.

They shouldn't have bought a house in the first place, should sell it and move back in with their parents

Graham_Devon

Interesting that on page 6, we still haven't really got any ideas on what could be cut, bar luxuries.

Were back to "people will just cope" and a general have a go at Graham for "worrying again" stance.

Those who say this "people will cut" are the very people who won't give the answers as to what they will cut. Instead we have to just assume they are all fine.

Were back to the exact same situaton of interest rates won't rise because it will cause too many issues, but when asked what these issues are, there aren't any as people will cope.

All I'm trying to do is explore the bullish stance on this and actually ask them to provide some detail to their responses. Hence I guess why it aggravates.

Percy1983

I suppose shopping in Aldi could help.

wotsthat

Graham_Devon wrote: »

Interesting that on page 6, we still haven't really got any ideas on what could be cut, bar luxuries.

That's right - if you ignore the ideas that have been proposed.

Obviously easier to cut non-essentials because they're...err..non-essential.

There's no real answer. Faced with an increase in costs most sensible people will simply sit down with a piece of paper and write down where that money is going and try and make some savings.

If it's impossible for someone to earn more, spend less and current spending is 100% on essentials then, if rates go up by 2%, they've got a problem.