Are we expecting BOE to remain at 4.75% on 8th February 2025?

michaels

What ever happens to house prices 'affordability' in terms of a share of wages will not change as this is 'demand' so any fall in prices will just balance out changes in interest rates.  People will still be willing to pay as much income as thy can afford to have a place to live and with insufficient supply, this means housing costs high enough to price enough people out.

In terms of 'I live in a house built on what was a field at the edge of my town and would die in a ditch top prevent houses being built on fields on the edge of my town' - that logic implies that it makes sense to bulldoze recent development and return it to green belt - if greenbelt always trumps new development then the same logic says it trumps previous development too - either the land is more valuable as green land than housing or it isn't.  Basic logic.

So the nimby above is also saying their home should be destroyed and the green land returned.

Aberdeenangarse

I guess Tony Fruitcake could have bought a house for less than a half what they are now, when he joined HPC  back when it started 20 years ago. So what if prices drop by 20% that’s what they’ve increased post covid, in many areas. The market may even stagnate for a few years? So what! People will still get on with their lives living in their homes while Tony will just mope around his bedsit wondering why his rent keeps going up each year.

zzzt

If people can't afford to pay their mortgages when interest rates are at 5%, does that mean they were mis-sold the mortgage? Surely part of the affordability checks would be to make sure people have the income to handle higher interest rates, if banks are being responsible lenders.

I guess if there has been some lifestyle creep, then that could explain it - people have been used to interest rates being low and having low repayments, so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

sevenhills

zzzt said:

If people can't afford to pay their mortgages when interest rates are at 5%, does that mean they were mis-sold the mortgage? Surely part of the affordability checks would be to make sure people have the income to handle higher interest rates, if banks are being responsible lenders.

Do people need an expert IFA to tell them to get a ten year fixed mortgage?
No one knows what the interest rates will be in two years time, we struggle to guess at six months.
It's highly likely that rates will go lower before the next election.

MobileSaver

zzzt said:

If people can't afford to pay their mortgages when interest rates are at 5%, does that mean they were mis-sold the mortgage? Surely part of the affordability checks would be to make sure people have the income to handle higher interest rates, if banks are being responsible lenders.

Of course people were not mis-sold mortgages, in fact the banks checked that at the time they could afford even higher rates than 5%. Once people have a mortgage the banks can't control how people spend their money or whether they decide to work less and reduce their income (by having a child for example.)

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

hildosaver

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world. People are in trouble financially because everything is considerably more expensive than before and wages have not kept up with inflation. This is the problem for those now looking at a big jump in mortgage payments or those trying to get a deposit together to buy a house.

Sea_Shell

hildosaver said:

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world. People are in trouble financially because everything is considerably more expensive than before and wages have not kept up with inflation. This is the problem for those now looking at a big jump in mortgage payments or those trying to get a deposit together to buy a house.

Undoubtedly, some people are.

They may have been assessed that they COULD afford a mortgage rise of x%, because they had (then) slack in their monthly outgoings at the time, but for some, any slack soon burns a hole in their pocket and they find it's better spent on xyz, than 'ringfenced' (ie saved) in case of such increases.  

MattMattMattUK

ian1246 said:

Those advocating bringing net migration down evidently haven't been paying attention to the economy and more specifically the route cause of inflation: Lack of workers.

The root cause of inflation is not lack of workers, it is largely external factors, though increased wage demands are having some impact. In some specific sectors there is a lack of workers, at opposite ends of the spectrum, highly skilled workers or unskilled seasonal workers, in the there is not an issue. 

ian1246 said:

Migration is a good thing - it brings economically productive individuals to our country, who proceed to contribute to our overall wealth and that of the government's treasury, allowing additional funding for services. In the long-run, it means the UK may yet escape the general decline of the rest of Western Europe and continue to maintain a significant influence on the world stage.

Migration can be a good thing, it needs to be managed and reflect the needs of the economy. However inflation can also be a bad thing, especially the way the UK has used it, which is failing to train skilled workers and failing to get the unemployed and economically inactive back to work, there is far greater economic benefit to trading the majority of a nation's skilled workers domestically, and of getting those who do not work into work, than importing people to replace them. 

ian1246 said:

In the short term, lack of workers means things like lack of nursery places for newborn children - meaning parents (often women, further widening the gender gap) have to stay at home - further worsening the worker-shortage and negatively impacting the quality of life of the younger demographics (young couples). It means lack of workers in the care sector and the NHS - which both directly affects death/survival-rates and also impacts long-term sickness: further worsening the quality of life of those waiting for treatment and removing them as economically-productive members of society.

We have more than enough people already here to do those jobs.

ian1246 said:

Now, its true there is a significant portion of the British-Born workforce who are long-term economically inactive.... unfortunately there is only so much which can be done to get them economically active. 

We have the highest level of economically inactive in Europe, we have the highest level of long-term sick (which is used to mask higher economic inactivity and unemployment) in Europe, we have the highest level of long term unemployed in Europe (although other countries, mostly Southern Europe have higher levels of overall unemployment). They need to be encouraged back to work, with increasing levels of encouragement until they do work.

ian1246 said:

It is far better to have controlled but generous levels of migration, to allow the UK economy to have the fuel it needs to grow and produce wealth.

We do not need high levels of immigration, we need the right kind of immigration and at relatively low levels. The influx of 500,000 unskilled immigrants last year is of no economic benefit, when it comes to social, economic and infrastructure it is a negative. Having the right immigrants can be and is a benefit to the economy, but what we currently have is not that.

ian1246 said:

The government needs to pull together an over-arching policy, tieing migration and population growth together with sufficient homes being built, as well as increasing the overall productivity in the UK economy - that means long-term investment in modern infrastructure and a generous taxation scheme for companies looking to invest into productivity-enhancing investments.

We do need to build more homes, infrastructure and social requirements, but in reality we also need to aim for lower or ideally zero population growth. I do agree our corporation tax system needs reform, there needs to be vastly more super-deductions for investment, it is why reinvestment in business so low compared to Germany, their corporation tax system actively encourages reinvestment, where as ours discourages it. 

ian1246 said:

From a personal perspective, It seems mad that in a country which has more rainfall than China, despite being a fraction of their geographic and population size, we have long-term droughts and have to import our energy from abroad (which is ££££ exiting the British economy to abroad). Take a leaf from the Victorians and build a ton of Dams, creating a whole bunch of reservoirs to meet both future-water needs and, crucially: allow a massive expansion in Hydro-power (which is far more consistent in the energy provided vs. solar panels or wind). Couple that with a whole bunch of floating-solar panel farms on the newly created reservoirs and it might go a long-way to securing future British-energy needs and helping mitigate future price rises (helping improve businesses productivity and making British people wealthier), whilst also stemming the flow of £££ out of the British economy to foreign suppliers. Bonus points since the resulting well-paid jobs created will likely be focused in Scotland, Northern England and Wales, helping mitigate the wealth-divide vs. the south, as well as potentially drawing some migration from the South to these area's which are generally "more affordable" to live (further helping control house-price increases).

The UK's long term problems are caused by a failure to invest, both in business, people and in infrastructure. If we want energy security then the only viable, long term solution in nuclear, I am all in favour of that, funded by tax rises, owned by the nation. 

ian1246 said:

How would this be paid for? If the government can pluck £300billion out of thin-air for the Pandemic and before that, the global-recession, I'm fairly sure it could pull a far more modest (couple of billion a year?) amount to invest into long-term infrastructure 

The £300 billion that was borrowed/printed is a huge part of why we are facing damaging inflation and the long term impacts of having a debt that exceeds GDP. A couple of billion would not touch the sides, the UK has had an investment deficit to 50+ years, to turn that around, as well as invest in energy security and mitigate the impact of climate change we are going to need to start spending an additional £120-180 billion per year.

ian1246 said:

or fail in that, generate the required £££ by juggling the budget or offering better rates at NS&I

Paying a higher rate of interest to customers does not result in increased profits, it decreases them, NS&I generates a rounding error in revenue in budget terms.

ian1246 said:

or just increasing (modest) taxation...

A modest increase in taxes will not come close, we need significant rises across the board. Combine IC and NI into one income tax, rase the starting rate to 36%, the higher rate to 45% and the additional rate to 49%, as well as reducing the personal allowance to a few thousand. Combine that with a withholding tax on dividend (in line with most other countries), corporation tax reform and benefits reform and we might get somewhere close to the amounts we might need. 

hildosaver

Sea_Shell said:

hildosaver said:

MobileS

zzzt said:

I guess if there has been some lifestyle creep, then that could explain it ... so the extra money gets spent on car leases, subscription services, regular take away deliveries, etc. which eat up the extra income.

This is it in a nutshell.

The vast majority of people complaining they can't afford their mortgage now really mean that they can't afford their mortgage while at the same time sustaining their new comfortable lifestyle...

This is nonsense. We are in the middle of a cost of living crisis and you think people are just spending too much on luxury items. Try living in the real world. People are in trouble financially because everything is considerably more expensive than before and wages have not kept up with inflation. This is the problem for those now looking at a big jump in mortgage payments or those trying to get a deposit together to buy a house.

Undoubtedly, some people are.

They may have been assessed that they COULD afford a mortgage rise of x%, because they had (then) slack in their monthly outgoings at the time, but for some, any slack soon burns a hole in their pocket and they find it's better spent on xyz, than 'ringfenced' (ie saved) in case of such increases.  

Some people maybe but the majority of people are not. I was replying to a poster saying the 'vast majority' of people are just complaining because they do not wish to reduce their 'comfortable lifestyle' - utter bilge. The people capable of sustaining a 'comfortable llifestyle' is in the minority. 

Newbie_John

We may argue on this as none of us has access to real data. Just based on my friends, they all fall into the second group - complain of rising costs but not really trying to bring down their quality of life - instead look for new roles, ask for pay rises, save less. 
37.5% of UK has a mortgage, if we assume they're all are on 5 year fixes - only a fifth of this is affected by the rate change this year, so again down to 8% - what proportion of this will struggle? Hard to tell. If the rates remain high for the next 5 years it will affect much more.

Even on this forum, recently we get more posts of people asking how to overpay rather than how to get some kind of help with raising rates.