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

ash28

Graham_Devon wrote: »

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

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

ash28

Graham_Devon wrote: »

Really?

Seems to me you are just stating this rather than having it backed up with anything. Nearly everyone I know finance their second hand cars on a loan. They are not going crazy, these are 3-4k cars.

The initial outlay is too much otherwise. And theres no point about going on about £1,000 cars. They are that much for a good reason. 10,000 miles a year is hardly excessive. Outside of cities, people travelling 15 miles to work and 15 miles back is very much the norm (allowing for extra trips to the shops and the like).

London is an exception, very much NOT the rule.

And stating that the average family doesn't have kids is plain absurd. So is the fact that you appear to assume parents can and will help out month after month after month.

I'm on the cautious side granted, but some of the stuff you are saying is so far away from the norm I see it's beggars belief....for instance, your assumption everyone buys cars outright and they have £70 sky subscriptions to simply axe.

I don't think you give people enough credit tbh. If people have to they will cut back, it could be food, fuel (no unnecessary trips), leisure activities, social outings, heat and light.....most people will have some slack in their budget, even in your example they had over £3k a year.

If it was me and I had a car loan and had a mortgage I was struggling to pay then I wouldn't pay the car loan...simple. A CCJ is better than being homeless. It might screw you for a while but it's better than the alternative.

As my old granny used to say the most important thing is to keep the roof over your head......

armour

Hi Graham,
You posted this ' interest rate rise scare' thread on the same day that Mark Carney stated that interest rates ar staying low for the forseeable.
you seem to have an almost religious belief that disaster is just around the corner.
1) interest rates probably aren't going up anytime soon
2) when they do the diferential probably won't remain at 3.5%
3) the vast majority will cope.

Deangelo

Graham_Devon wrote: »

This was the response from Martin Ellis today after being interviewed by the BBC.

He stated that he does not feel that house prices are rising out of kilter with incomes, as if you look at peoples mortgage payments, they are lower than the historical average.

When the BBC news presenter stated "yes, but thats because interest rates are so low, what happens when they go up". He stated that they feel they are going to be low for a long time yet, and when they do go up, they will br gradual increases and therefore people will simply be able to adjust their spending in order to pay their mortgages.

Now, this is said a lot on here aswell, so I just did a little calculation:

150k mortgage at 4% = £800.

If rates (mortgage rates that is, and they are rising already) rose 2%, the monthly payment would increase by £177 a month.

That leaves mortgage rates at a still low 6%. In 2007, my standard mortgage was running at 7.5% with base rates at 5.5%.

7.5% rates would increase the monthly payment by £321 a month.

So, let's start with £177 a month with base rates at a mere 2-3%. How would families simply "adjust their spending" in order to save £2,124 a year?

Any ideas? It's a hell of a lot to cut back on, and its something often said on here, so what could go in order to save that much money?

This thread could be called people will have to cut back for housing costs. There will be a lot more of the population renting than owning soon.

Yes as has been said most working people especially with children get tax credits.

In fact most people in the UK nowadays working or not (sickness benefit etc) get some kind of funds from the government.

In October this year Universal Credit will shake up the system and be the biggest change in generations.

The less funds going to the public the less funds available to go towards housing.

ukcarper

Deangelo wrote: »

This thread could be called people will have to cut back for housing costs. There will be a lot more of the population renting than owning soon.

Yes as has been said most working people especially with children get tax credits.

In fact most people in the UK nowadays working or not (sickness benefit etc) get some kind of funds from the government.

In October this year Universal Credit will shake up the system and be the biggest change in generations.

The less funds going to the public the less funds available to go towards housing.

Keep clutching at those straws.

N1AK

Graham_Devon wrote: »

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?

The example you give is a good one of a family on what would at first glance seem like an ok income who actually are already on tight finances. Some of your prices did seem a little inflated, but not enough to diminish the point.

The point others are making that is fair is that not everyone on a mortgage like that is going to be in this financial situation; the majority are likely to be notably better off because they have higher income, have had the mortgage for some time etc.

The underlying problem is that you can't afford a western lifestyle for a family of 4 on that income. So either people should be expected to have higher incomes to support their families or we continue to have state subsidised reproduction

wotsthat

Graham_Devon wrote: »

Seems I keep having to ask questions!

...and you'll keep asking questions until someone tells you that we'll all be doomed if rates rise by 2%!

Unless you stop underestimating what a) people will do to stay in their homes and b) what indebted governments will do to keep borrowing costs down you'll remain behind the curve.

This is the third or fourth thread recently about rates rising. My view is that pressure is building for an increase rates because government 10 year borrowing costs have been drifting up for a couple of months now but, as I said, just before yesterday's excitement..

wotsthat wrote: »

What the article doesn't consider is the likely impact on indebted governments if rates rise? Maybe they just start paying more to borrow - maybe there will be a policy response?

Voyager2002

Most people have far too much money, and waste it on junk that just makes them miserable. I mean, no-one really needs a television, motor car telephone, convenience food and lashings of alcohol. Back in the 1940s people mainly grew their own vegetables; got their entertainment talking with each other and if they were lucky reading books from the local public library; walked or cycled to get there they needed to be; and cooked everything from raw ingredients rather than buying it processed. And you know what? Everyone was a lot happier back then.

GhIFA

You seem to have this idea that EVERYONE who has taken out a mortgage has taken the maximum amount they can borrow and stretched themselves to the absolute limit, as this is the only way you can continue to peddle your doomsday scenario that you seem to be sitting gleefully awaiting.

So lets consider the reality.

Not everyone is in the position you are presenting. Some will have not borrowed to the very limit, but borrowed in line with what they can afford as repayments.

The vast majority will have borrowed on a deal, in a lot of cases a fixed rate, so they know what they will be paying for the next x number of years. This won't change in that time, in spite of what happens with interest rates. When the time comes to take a new deal, then they will shop around for the best deal available. Most people take this into account when buying a property, and most people factor in that the repayments could well go up at this point.

Many people on low rates will have taken the opportunity to overpay during the past few years so as to reduce the amount they need at the point of re-mortgage.

Most people will have reasonable expectations of career and salary progression over the course of the mortgage, so therefore increased ability to pay.

Most people are actually quite sensible when taking out a mortgage and buying a house as they realise that it is (in most cases) the single largest purchase they will have made in their lives. Most will consider the risks that exist in doing so, those using brokers will have those risks explained to them.

Most people will have put a lot of thought and planning into the process to explore all various scenarios that may arise.

However, there will be some that do none of this planning, that mortgage themselves to the hilt, make no plans to overpay whilst rates are low, or give any consideration to their future ability to service the mortgage when rates rise. These people will struggle when that happens, some will be able to cut back on some unecessary expenditure (like some of the examples given, which have then been discounted because it's convenient to the argument), some will be able to get additional work to provide more income, and some can't or won't be able to and maybe end up losing their houses. These people have always been around, they are not a product of the last 5 years, they are people that enter into arrangements without the proper thought or planning, and probably live most of their life in the same vein. They are nothing new.

This thread would probably have some merit if, as Graham seems to want us to believe, everyone with a mortgage fell into the latter group, but they don't, the vast majority fall into one of the earlier groups.

[Deleted User]

Voyager2002 wrote: »

Most people have far too much money, and waste it on junk that just makes them miserable. I mean, no-one really needs a television, motor car telephone, convenience food and lashings of alcohol. Back in the 1940s people mainly grew their own vegetables; got their entertainment talking with each other and if they were lucky reading books from the local public library; walked or cycled to get there they needed to be; and cooked everything from raw ingredients rather than buying it processed. And you know what? Everyone was a lot happier back then.

Of course EVERYONE was happier back then; going outside to get to the toilet, doing their washing by hand, being blown up by V2 rockets, having rationing, dying of polio. It was a great time to be alive!