Rishi Sunak and the Conservative Party.

[JamesT]

The general public should have budgeted for interest rates reverting to historic norms. Current rates are *still* well below those in the late 90s.

I can't seem to find a record of what rate it was, but I know when I took out my mortgage 4.5 years ago there was a 'stress test' where they checked I could still afford the repayments even if interest rates rose massively.

 

[bspahh]

The general public should have budgeted for interest rates reverting to historic norms. Current rates are *still* well below those in the late 90s.

Can they also budget for house prices to revert to historic norms? The first house I bought in 1997 was for £68500. It sold for £310,000 in 2015.

 

[duncanp]

Can they also budget for house prices to revert to historic norms? The first house I bought in 1997 was for £68500. It sold for £310,000 in 2015.

I don't think house prices will fall in absolute terms. (ie. a house that is worth £310,000 now will not fall in price to £68,500)

But what needs to happen is that the ratio of house prices to average earnings needs to fall to about 2.5 or 3.0, so that the proportion of take home pay that is taken up by mortgage repayments is more reasonable.

This isn't a new problem. When my father bought his first house in 1966 the mortgage repayments were £35 per month, and his take home pay was £80 per month.

 

[Darandio]

The general public should have budgeted for interest rates reverting to historic norms. Current rates are *still* well below those in the late 90s.

Oh, it's all our fault then? Got it.

 

[johncrossley]

Can they also budget for house prices to revert to historic norms? The first house I bought in 1997 was for £68500. It sold for £310,000 in 2015.

They rose to such levels because interest rates have been too low for too long. Even in the early 00s interest rates were going down when they should have been going up.

Oh, it's all our fault then? Got it.

It someone didn't think that interest rates could ever return to more normal rates then that is arguably very reckless. But rates should never have been cut so low in the first place, so that is the fault of policymakers.

 

[nw1]

The general public should have budgeted for interest rates reverting to historic norms. Current rates are *still* well below those in the late 90s.

So it's all the general public's fault is it?

Oh, it's all our fault then? Got it.

Beat me to it!

 

[MikeWM]

I can't seem to find a record of what rate it was, but I know when I took out my mortgage 4.5 years ago there was a 'stress test' where they checked I could still afford the repayments even if interest rates rose massively.

A rise of 5% from current was the standard test I believe - pretty sure that was what they did when I took out mine 6.5 years ago - though we're approaching that sort of rise now, and the market is currently anticipating a peak at around 5.75%, which would exceed that 5%.

 

[OuterDistant]

Who'd have thought that several years of emergency, near zero interest rates would result in this

 

[Bletchleyite]

Who'd have thought that several years of emergency, near zero interest rates would result in this

The natural level for rates historically is around 6%. Anyone who bought property not taking that into account was making a very stupid decision, and the chickens are coming home to roost.

Not being able to afford to buy is frustrating and annoying, sure, but it's better than buying when you really can't afford to.

 

[SteveM70]

The natural level for rates historically is around 6%. Anyone who bought property not taking that into account was making a very stupid decision, and the chickens are coming home to roost.

Not being able to afford to buy is frustrating and annoying, sure, but it's better than buying when you really can't afford to.

I think you're broadly right, but in (partial) defence of those struggling as mortgage rates increase, they're also having to deal with energy costs at unprecedented levels, food price inflation higher than its been in a very long time, fuel costs still at historical near-0highs etc

Its a bit of a perfect storm

 

[OuterDistant]

Quite.

It's awful that people simply trying to buy a home are in this position, but it's the result of various governments trying to kick the debt can down the road ad infinitum.

At some point, the music stops and there aren't enough chairs!

 

[WizCastro197]

The general public should have budgeted for interest rates reverting to historic norms.

Did you do this?

 

[birchesgreen]

Well i guess people should take interest rates into account, but they also need somewhere to live.

 

[Bletchleyite]

Well i guess people should take interest rates into account, but they also need somewhere to live.

It has its faults, but renting is another option for having somewhere to live if you can't afford to buy.

There's also the option of moving to a cheaper area (changing job if necessary), or taking a smaller house. A lot of the LBC callers, being as how it's still primarily a London station, were whining about having blown everything on a nice semi in Metroland - well, that was a bit silly, perhaps Northampton, Aylesbury or Bedford might have made more sense?

In the end we can't always have what we want. When I bought I chose a cheaper area (not rough, but cheaper than a lot of the rest of MK) so I wasn't overstretching. I'm very glad I did now.

(Some people are curiously unwilling to travel. One caller yesterday evening was almost in tears about moving out of Kingston because of all her friends, but there weren't any affordable flats - er, I mean, wha? There'd be flats affordable in her situation not far away, she'd just have to go a stop or two on the train or bus to see her friends etc)

 

[najaB]

The general public should have budgeted for interest rates reverting to historic norms. Current rates are *still* well below those in the late 90s.

I suspect that a lot of people did. However, how many of them would also have budgeted for energy prices more than doubling and inflation running at 10% at the same time?

 

[Busaholic]

? Who mentioned Rees-Mogg in this context?





The contempt would be if she refused to perform her duties as a representative until such time as she actually applies for Northstead/Chiltern Hundreds. Perhaps we'll find that out tomorrow, if she chooses to participate in the debate on the report on Johnson.

Rees-Mogg is referenced in almost all of the prominent Google entries on the subject, reflecting the lazy journalism of so much of the media in soaking up his biased and opinionated 'knowledge' on the subject and his willingness to spew it out night and day to these hacks. Anyone following this sorry saga can hardly be unaware of this fact.

Dorries resigned as an MP 'with immediate effect' and hasn't appeared at Westminster since. She has utter contempt for her constituents, or indeed anyone not a Johnson groupie. Even died-in-the-wool Tories might consider she should be sanctioned for her behaviour.

 

[johncrossley]

Did you do this?

I bought in the 90s and have chosen not to upgrade because I could see that houses were grossly overvalued, whereas most people in my position, including many of my peers, have taken advantage of their profit and bought bigger and bigger houses, as well as spending equity on cars, holidays, home improvements etc., borrowing up to the limit of what they were allowed to borrow, and so are now in a predicament.

There has to be some acceptance of personal responsibility. Buying a house with borrowed money is not risk free. It is an investment, just like investing in the stock market. Nobody who invests in the stock market on margin would expect a bail out when things go wrong.

 

[nw1]

I bought in the 90s and have chosen not to upgrade because I could see that houses were grossly overvalued, whereas most people in my position, including many of my peers, have taken advantage of their profit and bought bigger and bigger houses, as well as spending equity on cars, holidays, home improvements etc., borrowing up to the limit of what they were allowed to borrow, and so are now in a predicament.

There has to be some acceptance of personal responsibility. Buying a house with borrowed money is not risk free. It is an investment, just like investing in the stock market. Nobody who invests in the stock market on margin would expect a bail out when things go wrong. If you are not prepared to accept the risk of buying a house with a mortgage, then rent.

This, to me comes across very unsympathetic and, I have to say, rather judgmental and holier-than-thou, sorry.

Not everyone was lucky enough to buy in the 90s when property was dirt cheap, it would be nice if those who did could be a bit more empathetic to those who didn't.

There need to be better options than putting yet more of a financial burden on people. Sick to the back teeth of ordinary people having to bear the brunt of all this.

 

[johncrossley]

This, to me comes across very unsympathetic and, I have to say, rather judgmental and holier-than-thou, sorry.

Not everyone was lucky enough to buy in the 90s when property was dirt cheap, it would be nice if those who did could be a bit more empathetic to those who didn't.

There need to be better options than putting yet more of a financial burden on people. Sick to the back teeth of ordinary people having to bear the brunt of all this.

Yes, I was lucky, but luck plays a large part in investment. Was I unlucky not to buy Microsoft shares in 1990? What is your alternative to the home buying "democracy"? One answer is German style fair and affordable long term renting. Buying houses isn't such a national obsession there.

 

[nw1]

Yes, I was lucky, but luck plays a large part in investment. Was I unlucky not to buy Microsoft shares in 1990? What is your alternative to the home buying "democracy"? One answer is German style fair and affordable long term renting. Buying houses isn't such a national obsession there.

It would help if they didn't put up interest rates during a period when the cost of living is high. That to me smacks of monumental stupidity, as I said. But I don't suppose people like Hunt really care, as he's financially sorted for life.

I do agree about fair and affordable long term renting, but what do you do about the large number of us who already have a mortgage? Sell and rent? The rental market has to be reformed before we can do that.

 

[johncrossley]

but what do you do about the large number of us who already have a mortgage?

I don't think there is anything that can be done, realistically. Have you got any ideas?

 

[duncanp]

It would help if they didn't put up interest rates during a period when the cost of living is high. That to me smacks of monumental stupidity, as I said. But I don't suppose people like Hunt really care, as he's financially sorted for life.

I do agree about fair and affordable long term renting, but what do you do about the large number of us who already have a mortgage?

If the government didn't put up interest rates, then the likely consequence would be higher inflation, which would have just as much effect, if not more, on the cost of living as the increase in interest rates.

 

[takno]

I bought in the 90s and have chosen not to upgrade because I could see that houses were grossly overvalued, whereas most people in my position, including many of my peers, have taken advantage of their profit and bought bigger and bigger houses, as well as spending equity on cars, holidays, home improvements etc., borrowing up to the limit of what they were allowed to borrow, and so are now in a predicament.

There has to be some acceptance of personal responsibility. Buying a house with borrowed money is not risk free. It is an investment, just like investing in the stock market. Nobody who invests in the stock market on margin would expect a bail out when things go wrong. If you are not prepared to accept the risk of buying a house with a mortgage, then rent.

The number of people in this position is relatively small. In most cases people who bought in the 90s have either paid off the mortgage or paid off most of it. If things get tough they are also largely in a position to sell and trade down.

The people who will end up on the streets are people who (in your opinion) rashly overextended themselves 2-5 years ago to get on the property ladder, and are now finding that their rather high LTV mortgage is very expensive when taken off a cheaper fixed rate deal. It's quite possible that interest rates have never been this high in their lifetime, and since a degree in economic history isn't a requirement to get a mortgage they had little reason to believe they would be so high this early in their mortgage repayments.

It seems extremely callous of you to be judging people in this way tbh.

 

[nw1]

I don't think there is anything that can be done, realistically. Have you got any ideas?

As I said, not raising interest rates at inappropriate times would be a good start.

If the government didn't put up interest rates, then the likely consequence would be higher inflation, which would have just as much effect, if not more, on the cost of living as the increase in interest rates.

To my mind high inflation is best dealt with not by playing dangerous games with the livelihoods of ordinary people, but by more regulation of prices, primarily the energy sector whose high prices are trickling down to other sectors. I suppose that's a bit left wing for 2020s Britain, though.

Back to the subject of the thread, it's not going to do the Tories any favours in the next election. It will just heighten the perception of people like Hunt as out of touch rich kids who appear to have little appreciation of the consequences of their actions on the rest of us.

 

[Yew]

If the government didn't put up interest rates, then the likely consequence would be higher inflation, which would have just as much effect, if not more, on the cost of living as the increase in interest rates.

I fear that is fundamentally incorrect, the current inflation is not driven by domestic consumption, but shocks from the war in Ukraine on the oil price. I very much doubt that Mr Putin has much concern on the monthly payment on a mortgage in Zone 4...

There need to be better options than putting yet more of a financial burden on people. Sick to the back teeth of ordinary people having to bear the brunt of all this.

It's not that the housing market is fundementally broken, this is actually the intent of the design.

It someone didn't think that interest rates could ever return to more normal rates then that is arguably very reckless. But rates should never have been cut so low in the first place, so that is the fault of policymakers.

When are house prices going to fall to historic norms?

 

[duncanp]

I fear that is fundamentally incorrect, the current inflation is not driven by domestic consumption, but shocks from the war in Ukraine on the oil price. I very much doubt that Mr Putin has much concern on the monthly payment on a mortgage in Zone 4...


It's not that the housing market is fundementally broken, this is actually the intent of the design.

Perhaps a better way of expressing what I meant is that the consequence of not putting interest rates up would be that inflation would take longer to come down.

The current inflation may have been caused by the war in Ukraine (just like inflation in the 1970s and 1980s) but the longer inflation lasts, the more risk there is of the increased costs permeating through to all sectors of the economy, and an inflationary spiral developing.

The effect of inflation on people's purchasing power is a combination of how high the rate of inflation is, and how long that rate of inflation lasts.

 

[johncrossley]

When are house prices going to fall to historic norms?

Maybe never, because too many people have been brainwashed into thinking that they absolutely and definitely have to buy the biggest house they can afford. Long lasting house price crashes are possible, though. Just look at Northern Ireland. Prices in Northern Ireland are nearly 12% lower than in 2008 *in cash terms*, so about 40% lower in real terms.

 

[Yew]

Perhaps a better way of expressing what I meant is that the consequence of not putting interest rates up would be that inflation would take longer to come down.

The current inflation may have been caused by the war in Ukraine (just like inflation in the 1970s and 1980s) but the longer inflation lasts,

Oil prices had major increase comparing pre-post oil crisis, whereas currently in many places fuel prices are within spitting distance of normal levels. Raising interest rates just causes even more pressure on struggling households, and depresses the economy.

the more risk there is of the increased costs permeating through to all sectors of the economy, and an inflationary spiral developing.

And this would be worse than the current situation how exactly?

 

[takno]

The current inflation may have been caused by the war in Ukraine (just like inflation in the 1970s and 1980s) but the longer inflation lasts, the more risk there is of the increased costs permeating through to all sectors of the economy, and an inflationary spiral developing.

Could have been except that it started before the war in Ukraine and hasn't primarily been characterised by an oil price shock. It's more a combination of Brexit, idiotic management during Covid, an abject failure to manage the economy over a sustained period leaving it extremely vulnerable to shocks, and the creation of a gig economy and in-work poverty in the public sector while times were less awful, meaning that there's nothing left to lose by striking to keep food on the table now.

Inflation has thoroughly permeated all aspects of the economy, and in terms of expecting it come down we'll really just have to sit and wait it out. Interest rates are simultaneously an ineffective and brutal way of trying to address it.

 

[Busaholic]

Boris Johnson XI managed 7, their opponents 354