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

Graham_Devon

jackieblack wrote: »

Teenage now, (more expensive than small children)

And not that it's relevant (or anyone else's business) but I received a small inheritance and we worked out that the solar pv system would be a better long term investment than paying that amount off the mortgage.

I believe your amount of £1068/£1214 would only occur in the event of a rate rise to 8% (if I've read the posts correctly).
As rates are nowhere near that at the moment, now would be the time to build a cushion for when/if the rates rise to 8%

Maybe it's an old-fashioned concept but I understand people used to consider how an increase in rates would affect their ability to live/pay bills BEFORE taking out a mortgage.

I'm not trying to be offensive or pry, it's just you stated you lived on less than what was stated, and I wondered how, considering the investment. Presumably you have backup funds should a washing machine pop or want to spend on a larger item as I doubt you would have spent your last penny on a solar system!

The point is, others in this position woudln't. Everything has to come out of that money. That includes upgrading the car when its no longer serviceable. It includes buying another fridge when it packs up and so on.

If we assume someone just buys the essentials out of their £1000 and has a buffer for everything else, then it's a slighty different scenario.

We can't assume that these people had a large buffer as they wouldn't be cutting back on essentials or struggling as much in the first place.

Graham_Devon

ukcarper wrote: »

Whose encouraging anything we are just explaining that people will cope if rates rise they may not like it but they will cope as I did when my mortgage repayments reached 60% of my take home pay in the 80s

I stated who was encouraging this in the very post you quoted.

Not least the government is encouraging it by offering up lend a hand. How often do we encourage it on here? Just look at the glee today regarding house prices increasing. Look at Hamish and his "lending needs to triple, more needs to be done to allow people to buy in" posts.

Thats encouragement.

jackieblack

Graham_Devon wrote: »

I'm not trying to be offensive or pry, it's just you stated you lived on less than what was stated, and I wondered how, considering the investment. Presumably you have backup funds should a washing machine pop or want to spend on a larger item as I doubt you would have spent your last penny on a solar system!

Indeed, we wouldn't.
Any cushion we have has been built up as a bonus of low rates in the last year and a half. (We were tied into a higher fixed rate for 5 years before that, so know that payments at that rate are manageable.)

Graham_Devon wrote: »

The point is, others in this position woudln't. Everything has to come out of that money. That includes upgrading the car when its no longer serviceable. It includes buying another fridge when it packs up and so on.

If we assume someone just buys the essentials out of their £1000 and has a bifer for everything else, then it's a slighty different scenario.

Indeed, but as stated you are looking at that being a possible future position, so while the current position is more generous now would be the time build up that buffer for when/if rates rise.

Anyone taking a mortgage out (particularly at the moment with rates so low) with no 'wriggle room' in their budget for possible rate rises is, frankly, at best extremely naïve and at worst an idiot.

sheffield_lad

I have been looking to fix long term for some time and find I can get 3.89% fixed for 10yrs with Yorkshire or Woolwich. Not going to do it yet though as I can't see rates going up this year or next.

ukcarper

Graham_Devon wrote: »

I stated who was encouraging this in the very post you quoted.

Not least the government is encouraging it by offering up lend a hand. How often do we encourage it on here? Just look at the glee today regarding house prices increasing. Look at Hamish and his "lending needs to triple, more needs to be done to allow people to buy in" posts.

Thats encouragement.

Help with a deposit is not the same as changing affordability criteria. I'm not jumping for joy because prices are increasing I've stated often enough that in my opinion stagnation is the best way forward. But my point is most people would cope as they did in the past..

morag1202

ukcarper wrote: »

What makes you so sure that if base rate increase the high margins banks are using will remain.

Graham, please answer this and also, what makes you so sure that rates will rise before wages increase?

antrobus

ukcarper wrote: »

What makes you so sure that if base rate increase the high margins banks are using will remain.

What makes you think that banks have "high margins"?:)

Graham_Devon

jackieblack wrote: »

Anyone taking a mortgage out (particularly at the moment with rates so low) with no 'wriggle room' in their budget for possible rate rises is, frankly, at best extremely naïve and at worst an idiot.

This is my point.

This is precisely what lend a hand encourages. It encourages you to take a 95% mortgage because saving is too much of a hassle, take too long, or people say they don't have the money to save.

Therefore, these people are unlikely to have any buffer and are likely at todays house prices vs wages, to be stretched from the outset. Nevermind the fact that in 5 years time they will have the 20% loan to start repaying too.

Graham_Devon

morag1202 wrote: »

Graham, please answer this and also, what makes you so sure that rates will rise before wages increase?

It's a fair question. I don't know that.

I'd suggest though that if wages were rising at the pace required to create increases the size of money were talking about (2k a year), we'd have a slight problem of hyperinflation!

Graham_Devon

ukcarper wrote: »

Help with a deposit is not the same as changing affordability criteria. I'm not jumping for joy because prices are increasing I've stated often enough that in my opinion stagnation is the best way forward. But my point is most people would cope as they did in the past..

Help with the deposit encrouages people without the means (deposit), to skip the saving part and get into the housing market today.

These people, by very definition are unlikely to have any buffer in their finances. Otherwise, why would they use such a scheme with higher mortgage rates?

This is just plain common sense that it encourages people who have less to take a stake. That it the WHOLE idea of the policy.