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

ukcarper

antrobus wrote: »

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

Perhaps I should have said margin above base rate.

ukcarper

Graham_Devon wrote: »

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.

First you tell me it is impossible to save while at the same time you want deposits to remain high.

jackieblack

Graham_Devon wrote: »

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.

People have to take responsibility for their own borrowing decisions, including planning for future changes in circumstances. It's no good complaining later when they can't afford it, the same as people who run up enormous credit card bills and then blame the CC company for letting them have a card.

Graham_Devon wrote: »

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.

If people have any common sense, they take out their mortgage now after working out whether they can still afford the payments if they rise 2 or 3 %, minimum. Until that happens they build up a cushion. Hopefully, in 5 years they'll have a decent cushion and wages will have risen, but before embarking on this scheme they need a clear plan of how they're going to tackle the extra 20%. Again, personal responsibility.

When rates begin to rise it will happen gradually and it is easier to make gradual/small changes than suddenly need to find an extra £300 overnight.

If they don't have the common sense to do this, then they will get what they deserve. Sorry if that sounds harsh, but (again)borrowers have to take personal responsibility for their borrowing decisions.

Meanwhile, the answer to your question

Graham_Devon wrote: »

OK, do you think 1,068 is enough to live on after mortgage costs?

remains 'yes'!

Graham_Devon

Jackie, I agree with everything you say.

Unfortunately I feel the government is encouraging people to get into the market without taking any notice of all this.

Again, unfortunately, it won't just be these people effected. It will be all of us. For a start, 20% of our cash as collective taxpayers invested in the house! Secondly, potential problems such as this, disregarded by those in the business as "well they will just adjust" effect us all. We are living through the problems caused by the last mess up caused by the few while chasing the gold at the end of the rainbow and encouraging higher and higher debt to "get in now".

jackieblack

I hear what you're saying.

Whatever the government is encouraging, ultimately, it still boils down to personal responsibility.

I wouldn't worry too much about the 20%. I'd be surpised if there wasn't some clause in the contract that states the government/taxpayer gets it's money back first in the event of repossession.

And yes, we are 'living through the problems caused by the last mess up caused by the few while chasing the gold at the end of the rainbow and encouraging higher and higher debt', and there's no simple solution. All we can do is manage our own finances as best we can and fortify our own postions against future 'attacks'.
And again, they can encourage whatever they like, but they can't force people to go along with it!
It is up to each individual to develop the financial maturity to only borrow sensibly and take responsibility for those decisions

ash28

Graham_Devon wrote: »

I reckon that would be pretty darn tight.

For a start there can be no debts, but I guess they would need a car, so I'm going to suggest £100 a month on car loan.

£150 per month on council tax.
£150 on electric / gas / water.
£240 a month on food.
£150 a month on fuel (for the average car and average mileage)
£15 a month on presents etc (thinking christmas)
£35 a month road tax, MOT, servicing.
£70 a month car and home insurance
£10 a month TV licence
£30 a month clothing and footwear (believe me, this is scrimping by when it comes to growing kids....one pair of shoes and that budget for the month is blown).

Now, after all of those, what I would class, quite low, the clothing for example I have assumed ebay prices for second hand stuff, but workwear could cause issues) but mandatory expenses for a family, were left with the grand total of £264.

That £264 has to pay for:

Any item of furniture / white good.
Mobile
Landline
Boradband
Any unexpected car repair costs (tyres, MOT failiure etc)
Prescriptions,
Any kids event or childs birthday
Any housing repairs
Any recovery (AA, RAC)
Any personal items (small items, such as hairdressing for a family of 4 soon racks up)
School meals
Dentists
Opticians
Any single hobby or event you undertake with the kids....even if it's paying for parking so you can take them to the beach / park
Any emergency.

Quite a long way for £240 to go, don't you think?

So, we'd HAVE to cut back. So, what goes? The washing machine never gets replaced? You never ever have to replace any item in the house? Broadband and PC, remembering the kids do benefit from this with schools now? Precriptions...a bit like those families in Greece?

Doesn't seem all that great in todays age to be having to get rid of this stuff in order to pay for a roof, does it?

Why £100 for a car loan.......you can buy a decent 2nd hand car for not a huge amount of money and even if they had a loan it would have been taken out pre interest rate rises and would end.....when it does you keep the car until you can afford another one.

the £260+ you have estimated will be left is over £3k a year. Most people who bought in the last few years will have all of their furniture and white goods.

Washing machines and white goods last quite a long time if looked after....if your sofa gets tatty you live with it.

What's so different about today compared to 20 years ago.....are people entitled to have "stuff"? You don't need a mobile and a land line.....you don't need a contract mobile.....what about PAYG or sim only? You don't need broadband - for most of us it's a nice to have but it's not a necessity.

And have people lost the ability to service a car? We learned a lot of things when interest rates were very high....one of them was simple car repairs - changing brake pads, oil and filters, bulbs.....even I could change the brake pads. We have the Haines manuals for our cars.

You need to look on the Old Style Board and see how people cut back and save money - often through necessity and the thing is they do it. And yes, it might be hard to try and feed your family for £20 or £30 a week but people do it when they have to.

Turn the heating down one or two degrees, invest in energy saving light bulbs, turn the water temperature down a couple of degrees.

There are lots of things people could do that would save them money over the course of a year.

If we went on a car journey to visit family with the kids we used to take sandwiches and drinks with us....we couldn't afford to stop at a motorway service station....they were toilet stops and nothing else. If we went out for the day we took a picnic. When we stop in motorway services they are often full of families and they aren't just using the toilets...McDonalds, KFC etc do a roaring trade.

Children have free prescriptions, glasses and dental treatment.....and if you need regular medication buy a pre paid exemption certificate...lots of opticians give free or reduced price eye tests and glasses don't have to be expensive.

When and if the SHTF people will change their lifestyle - if it makes the difference between losing and keeping their house they will change.

Graham_Devon

jackieblack wrote: »

I wouldn't worry too much about the 20%. I'd be surpised if there wasn't some clause in the contract that states the government/taxpayer gets it's money back first in the event of repossession.

It's set up so that the taxpayer protects the banks from losing out. So we are the first to lose out in such an event.

That's how the scheme is setup and that's what it's designed to do. There is very little risk to the bank, as the risk is with the taxpayer, therefore, the banks are happy to lend.

Graham_Devon

ash28 wrote: »

You need to look on the Old Style Board

Can't. Been thrifty and got rid of the internet I don't need

sterlingstash

Is this not rather a self defeating thread. If large numbers of people had to significantly cutback their spending, then the green buds of life we are seeing in the economy which might prompt interest rate increases (highest quarterly car sales, falling unemployment etc) would soon be extinguished, leading to interest rates coming back down (remember Carneys wider remit on economic growth...!)

michaels

Graham

I bought in 2010

I am debating whether to swap my offset base +1.99% rate for 2.49% fixed for 5 years....but now I'm not sure if it is worth it as the BoE have announced rates will remain low for an extended period.

I can not understand what you are worrying about?