Fiscal help for mortgage holders - is this a realistic possibility?

inkydolphin

Sea_Shell said:

My initial reaction is no!!   And nor should they.

But, TBH nothing would surprise me in the lengths government may go to to prop up the housing bubble.

Depends how "messy" it gets. ☹️


What's cheaper for them?   Subsidising mortgages or paying housing benefit for those who are repossessed with no equity (or other assets) to fall back on.

But you don't get housing benefit (being replaced by Universal Credit I think) unless you have a low income. 

Sea_Shell

inkydolphin said:

Sea_Shell said:

My initial reaction is no!!   And nor should they.

But, TBH nothing would surprise me in the lengths government may go to to prop up the housing bubble.

Depends how "messy" it gets. ☹️


What's cheaper for them?   Subsidising mortgages or paying housing benefit for those who are repossessed with no equity (or other assets) to fall back on.

But you don't get housing benefit (being replaced by Universal Credit I think) unless you have a low income. 

Ok, I might have got the terminology wrong....but where do a repossessed family go, if they can't afford (or find) private rents or have any equity or other assets to fall back on?

biscan25

Fiscal intervention - No
Monetary intervention - Yes. They've already started this with gilt buying, and you can probably count more muted expectations of base rate rises, compared with a week or so ago

dander

brownbagsFTB said:

Yes! The big mortgage lenders are meeting with the chancellor today to discuss measures. This interest rate hike is disastrous for the housing market, loans are much higher now than in the 80’s so comparing percentages doesn’t really stack up. It’s about the ratio of income to mortgage payments and at high interest (>6%) it will be untenable for a lot of people, particularly first time buyers or those who have bought in the last few years on higher LTVs. The BoE base rate rises aren’t just governed by inflation, they have to strike a balance in rises to avoid a recession. It’s all so up in the air as it’s changing daily but I live in hope that the outcome won’t be as severe as we all think and that some sort of correction is on the way! 

The point is not about comparing rates, it's about the fact that in the 80s there was a massive rate of repossessions and the property market tanked in a way that is pretty incomprehensible if 2008 is what you think of as a crash. Homes halved in value. Negative equity was a huge problem in that people couldn't sell because they owed their banks more money than their home was worth, even if you got repossessed it didn't clear your debt to the bank -  buy at £100k, get repossessed, bank sells your house for £50k - you are now homeless and also still £50k in debt unless you go bankrupt while  you're at it. It wasn't 14% and everyone managed because older generations had every thing golden,  it was carnage and there weren't rescue packages or government intervention. 
The point is also not to say "it was !!!!!! then, don't complain", the point is that we have precedent that governments don't come to rescue homeowners when mortgage rates get hard to manage. They will let us sink or swim.

Sea_Shell

dander said:

brownbagsFTB said:

Yes! The big mortgage lenders are meeting with the chancellor today to discuss measures. This interest rate hike is disastrous for the housing market, loans are much higher now than in the 80’s so comparing percentages doesn’t really stack up. It’s about the ratio of income to mortgage payments and at high interest (>6%) it will be untenable for a lot of people, particularly first time buyers or those who have bought in the last few years on higher LTVs. The BoE base rate rises aren’t just governed by inflation, they have to strike a balance in rises to avoid a recession. It’s all so up in the air as it’s changing daily but I live in hope that the outcome won’t be as severe as we all think and that some sort of correction is on the way! 

The point is not about comparing rates, it's about the fact that in the 80s there was a massive rate of repossessions and the property market tanked in a way that is pretty incomprehensible if 2008 is what you think of as a crash. Homes halved in value. Negative equity was a huge problem in that people couldn't sell because they owed their banks more money than their home was worth, even if you got repossessed it didn't clear your debt to the bank -  buy at £100k, get repossessed, bank sells your house for £50k - you are now homeless and also still £50k in debt unless you go bankrupt while  you're at it. It wasn't 14% and everyone managed because older generations had every thing golden,  it was carnage and there weren't rescue packages or government intervention. 
The point is also not to say "it was !!!!!! then, don't complain", the point is that we have precedent that governments don't come to rescue homeowners when mortgage rates get hard to manage. They will let us sink or swim.

Quite.

But the landscape of handouts in recent years means there will be mounting pressure for them to "do something", to stop people drowning.

☹️

propertyhunter

They can't do anything because it means increasing their debt, which means international markets think we're less likely to pay it back and therefore interest rates rise more. They need to redistribute wealth and reduce borrowing. Labour will come in and likely impose higher taxes and have a more credible plan to reduce debt to income, thereby giving the markets confidence we can pay our debts, and interest rates falling because we're less risky. In the short-term, interest rates will be high to combat inflation - this needs to cause a recession that dampens economic activity. 

BikingBud

But there has been continual fiscal intervention since 2006; suppressed interest rates, HTB, HTB2, SDLT holidays, QE etc all to support the illusion of wealth due to HPI.

The can has been kicked down the road many times, by successive governments, and like crack addicts people have lapped up the low interest and over extended without ever considering how it might play out.

OhWow

Sea_Shell said:

inkydolphin said:

Sea_Shell said:

My initial reaction is no!!   And nor should they.

But, TBH nothing would surprise me in the lengths government may go to to prop up the housing bubble.

Depends how "messy" it gets. ☹️


What's cheaper for them?   Subsidising mortgages or paying housing benefit for those who are repossessed with no equity (or other assets) to fall back on.

But you don't get housing benefit (being replaced by Universal Credit I think) unless you have a low income. 

Ok, I might have got the terminology wrong....but where do a repossessed family go, if they can't afford (or find) private rents or have any equity or other assets to fall back on?

The same place those who haven't been able to afford private rents have already been going -renting a room/s in an HMO or with a live in landlord; back with family; temporary housing; with charities.

OhWow

propertyhunter said:

They won't do anything, and they shouldn't. A correction is part of the property cycle. People will need to really cut back on their spending to keep their house if they're on the edge. This will cause a long and deep recession that will cause inflation to fall back significantly with interest rates to follow (give it 2-3 years).

What really needs to come out of this mess is a realisation from the public that the conservatives have no idea what they are doing, and throw them out at the next opportunity. You could put a 10 year old in as prime minister these days and they wouldn't do half as bad a job as the current government. 

The UK votes Conservative when things are bad and when things are going great, they try a Labour government.

Sea_Shell

https://news.sky.com/story/lenders-push-kwarteng-to-extend-mortgage-guarantee-scheme-12713430


Make of that what you will 😉