Could you afford your mortgage under a Corbyn government?

Crashy_Time

NineDeuce wrote: »

They will never go up to 15% though. Why would the BoE intentionally put millions of people with unaffordable debt?

Back in the 80s and 90s, houses were much more affordable than they are now, so the comparison is fairly irrelevant.

The BOE just follow the Fed, I think the historical data shows that clearly? The thing to think about though is why were houses so much more affordable back then, yes there was some wage inflation, but higher rates/tighter lending tamed the market as well. High house prices are a blip not a norm.

Voyager2002

vmp wrote: »

I'm currently midway through a 5 year fixed rate mortgage and with the possibility of Corbyn rising to power I'm thinking about what could happen.


If we disregard Blair and Brown (generally regarded as centrist, with Thatcher describing Blair as her "greatest achievement"), the most recent Labour government was James Callaghan between 1976-1979.


During this time, the Bank of England base rate peaked at 15%.


My mortgage payments are currently about £1,400 a month.


If interest rates were at 15%, they would increase to about £3,900 a month according to the MSE mortgage rate calculator: https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator#results


Frankly, I can see no other outcome to this than my house being repossessed.


How would everyone else get along?

I think you need to look more carefully at your history...

The 1970s was a period of very high inflation across all Western countries (some people blame the amounts the US government borrowed for the Vietnam war; some blame the dramatic increases in oil prices...). The conventional way to control inflation is to put up interest rates, and so this happened across all major market economies, no matter whether their governments were left- or right-wing. And bear in mind that for much of this period wages and general incomes were keeping up with inflation, so the pain was limited. Of course home-owners saw the real value of their outstanding mortgages shrink drastically, so it was not all bad...

Whatever you think about Corbyn, he is unlikely to cause the US government to borrow to such an extent that they have to do something like abandoning the gold standard (stopping linking the dollar to the value of gold, which is what Nixon did). Nor do I expect him to organise a cartel of oil producers and encourage them to quadruple the prices they charge: that is what we saw with the emergence of OPEC.