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

HAMISH_MCTAVISH

Graham_Devon wrote: »

To be fair, it's long been one of the reasons on here as to why rates won't go up. This thread wa sa result of a certain scotsman stating rates won't go up as too many will struggle. Now, it appears this isn't the case at all.

I do hope you're not referring to me.

CLAPTON

Graham_Devon wrote: »

To be fair, it's long been one of the reasons on here as to why rates won't go up. This thread wa sa result of a certain scotsman stating rates won't go up as too many will struggle. Now, it appears this isn't the case at all.

my question was, as you have such a high regard for Merv, why didn't merv ACT when he had the power (last week)?

Graham_Devon

HAMISH_MCTAVISH wrote: »

I do hope you're not referring to me.

I do apologise, I got you mixed up with michaels.

Though sure you gave the beer icon somewhere when it was stated rates couldn't rise due to those effected!

Graham_Devon

CLAPTON wrote: »

my question was, as you have such a high regard for Merv, why didn't merv ACT when he had the power (last week)?

Act how exactly?

GhIFA

Graham_Devon wrote: »

So out of interest, as the majority appear to feel there will be no real impact on families when rates rise....why did Mervyn King state many in their 30s and 40's would find it unsustainable if rates rose?

Load of nonsense?

Nobody has said there will be no impact, people have merely said that many will find ways of coping, and given countless examples of how, which you've chosen to ignore.

CLAPTON

Graham_Devon wrote: »

Act how exactly?

well, merv used to have a small amount of influence on things like interest rates, printing money, bank capitalisation, sacking of bank CEOs etc etc.

all in all it would be reasonable to suppose he had a small amount of influence on the stability of lending institutions and their likely solvency should interest rates rise.

Cornucopia

In order for there to be an effect, the chargeable mortgage rates would have to change markedly.

People are not going to be affected if they are on fixed deals, or if the banks return to more typical long-term margins against base rates.

Personally, if I still had a residential mortgage, I would be looking very carefully at five year fixed rates. I was paying only £75 per month on my BR-0.05% Tracker when the rates crashed, and I would be delighted to do something similar if/when rates go back up again.

neverdespairgirl

Graham_Devon wrote: »

Plus a bit more reliability in general. If you are doing 15-30k miles a year, would you want to do it in a £1,000 car? I wouldn't. Been there done that and spent too much time trying to fix things and being stranded.

I don't actually have a car loan, but I would if I had to. Plus I don't think 7% interest is particularly expensive for a general loan?

If I was doing under 5k miles a year, I'd certainly be on the side of buying something, anything. But I'm doing closer to 20k a year.

One of my sisters has a car that I seriously doubt is worth more than £1k, and she does serious mileage - she's a journalist. She looks after it well, though.

My other sister also does a lot of miles, and has a far more expensive, larger car, with 4 wheel drive as she does quite a bit off-roading.

ash28

Graham_Devon wrote: »

So out of interest, as the majority appear to feel there will be no real impact on families when rates rise....why did Mervyn King state many in their 30s and 40's would find it unsustainable if rates rose?

Load of nonsense?

This is from the Bank of England Financial Stability Report of last month....even it says people would need to take some kind of action...like cut down on essential spending or work longer hours to earn more income or change their mortgage.......they weren't predicting armageddon.

One indication is that households accounting for 9% ofmortgage debt would need to take some kind of action — such
as cut essential spending, earn more income (for example, by
working longer hours), or change mortgage — in order to
afford their debt payments if interest rates were to rise by just
1 percentage point). This would rise to 20% o fmortgage debt if interest rates were to rise by 2 percentage
points. Provided borrowers are able to take actions in order to
afford their debt payments, then this may not lead to
significantly higher losses for banks

http://www.bankofengland.co.uk/publications/Documents/fsr/2013/fsrfull1306.pdf

And to be honest I don't think it's homeowners the BoE or Merv are worried about.....it's the banks. If there are mass defaults and subsequent repossessions on mortgages I would imagine some of the banks will be in deep doodoo.

However that being said one thing the BoE seem to have ignored are the number of borrowers since 2005 who have taken advantage of low rates to pay down their mortgage.

According to the CML about a third of borrowers (who took out mortgages from 2005 onwards) have paid down their mortgage...and they ignore people who have paid less than 5% and who have paid off their mortgage fully.




http://www.cml.org.uk/cml/publications/newsandviews/128/482

I don't think anyone has said there will be no impact on people if rates rise....obviously there will....but unless people are on their absolute beam ends there will be things they can do to help them meet the new payment, even if it means extending their mortgage term.

There have always been people who get repossessed even in financially good times and I suppose there always will be. The issue for the banks will be - does it make more financial sense to give people leeway with their payments if they get into difficulties or to repossess....in a falling housing market it probably makes more sense to be lenient...then they (the banks) will be less likely to make a loss on their balance sheets. If they show forebearance it's more likely to be for their own benefit than the benefit of the mortgage holder.

IveSeenTheLight

Graham_Devon wrote: »

People buy cars on loan for all sorts of reasons. At one point, my job demanded I had a car under 5 years old. Had to look OK when visiting clients.

If this was part of your role / job description, I presume that an allowance was provided for this transport.