Mortgages - Help!

[armaghniac]

Unemployment will naturally begin to rise if interest rates remain high as the cost of borrowing goes up. Retail businesses are already feeling the pinch and other sectors are not immune to energy price rises. So businesses are facing the double whammy of higher cost of doing business and reduced sales as customers have less disposable income to spend. There is a time lag with all of these things and it will take a while before the full effects are felt.

Energy prices remove money from everyone, so that leaves less to spend on other things. Interest rates will increase and will be higher, but they will not be "high". In the Eurozone they will not exceed 4%, while in the UK they might be 1 or 2% higher. I don't see anything like 2007.

[imtommygunn]

Is it not a problem though that the money is still being spent allbeit not in the retail sector etc but to energy companies so you have inflation to prevent spending but spending is a must due to energy prices?

Every week you read about loads of small businesses shutting. Things like chippies etc are moving to a place they are no longer viable business due to overheads.

[Franko]

Aye but in 80s still far worse off. No jobs. No money. Emigration

I'd hold off talking until you see what's coming

This could make 2008 look like the boom times

We have high employment. No indication that is going to change soon. Thats the key difference, back in the day we were all skint. Boys from the blackstuff all over the place "gis a job"

We had high employment in early summer 2007 also.

By January 2009 plane loads of young Irish people were arriving in Melbourne with one-way tickets

Mostly for the sesh

That must be the Derry City ones... 

The vast majority went to work

[seafoid]

This is the big mortgage risk

https://www.ft.com/content/e759c33f-2515-4269-8c9b-e9e517d22a3d

A top Federal Reserve official has warned it is a "fantasy" to think the US central bank can bring inflation down sufficiently without raising interest rates to a level where they constrain the economy. James Bullard, president of the St Louis branch of the Fed, said the central bank needed to be more aggressive in its efforts to root out the highest inflation in four decades as he called for rates to rise to a point where they actively curtail growth.

[Milltown Row2]

Is it not a problem though that the money is still being spent allbeit not in the retail sector etc but to energy companies so you have inflation to prevent spending but spending is a must due to energy prices?

Every week you read about loads of small businesses shutting. Things like chippies etc are moving to a place they are no longer viable business due to overheads.

How much profits will the energy companies make with these hikes or will they be showing no profits? If they are showing profits then surely they are just taking the piss?

[yellowcard]

Unemployment will naturally begin to rise if interest rates remain high as the cost of borrowing goes up. Retail businesses are already feeling the pinch and other sectors are not immune to energy price rises. So businesses are facing the double whammy of higher cost of doing business and reduced sales as customers have less disposable income to spend. There is a time lag with all of these things and it will take a while before the full effects are felt.

Energy prices remove money from everyone, so that leaves less to spend on other things. Interest rates will increase and will be higher, but they will not be "high". In the Eurozone they will not exceed 4%, while in the UK they might be 1 or 2% higher. I don't see anything like 2007.

That is the current forecast but as with all forecasts they come with a bit of a health warning. Events can sometimes take over as the combination of Brexit, Covid and the war have all had huge impacts on the economic outlook. 

[imtommygunn]

Is it not a problem though that the money is still being spent allbeit not in the retail sector etc but to energy companies so you have inflation to prevent spending but spending is a must due to energy prices?

Every week you read about loads of small businesses shutting. Things like chippies etc are moving to a place they are no longer viable business due to overheads.

How much profits will the energy companies make with these hikes or will they be showing no profits? If they are showing profits then surely they are just taking the piss?

Someone is making a bit of money from it that is for sure. It will change nothing with this government.

[armaghniac]

"Moneyfacts, a data provider, said that homeowners paid 2.34 per cent on the average two-year fixed deal last December but this had jumped to 6.46 per cent."

That will be a bit of a squeeze on Sterling mortgage holders. But UK bonds are 5% so mortgages are not going to come down.
People in the ROI didn't have very cheap mortgages, but they will see less of an increase now.
House prices will not be going up.

[seafoid]

In 2007 subprime rates which were priced at 2-3% went to 5-7%.
The market collapsed and Fianna Fail collapsed some time later. Lehman is what people remember, not the jacking up of rates.
Most ordinary Brits have very little spare cash. On a house worth 400K, 6% is an extra 12k and there are no payrises.
The housing market cannot support 6%. You must be joking.

[Milltown Row2]

In 2007 subprime rates which were priced at 2-3% went to 5-7%.
The market collapsed and Fianna Fail collapsed some time later. Lehman is what people remember, not the jacking up of rates.
Most ordinary Brits have very little spare cash. On a house worth 400K, 6% is an extra 12k and there are no payrises.
The housing market cannot support 6%. You must be joking.

Anyone who has a mortgage for £400K should be able to afford the hike, if not they should not have taken on such a big mortgage

[Maroon Manc]

One way out of this mess in the short term and even possibly long term is too allow those who are heading for trouble to switch to an interest only mortgage.

[seafoid]

In 2007 subprime rates which were priced at 2-3% went to 5-7%.
The market collapsed and Fianna Fail collapsed some time later. Lehman is what people remember, not the jacking up of rates.
Most ordinary Brits have very little spare cash. On a house worth 400K, 6% is an extra 12k and there are no payrises.
The housing market cannot support 6%. You must be joking.

Anyone who has a mortgage for £400K should be able to afford the hike, if not they should not have taken on such a big mortgage

Banks can't stop issuing mortgages and their risk management is atrocious. The UK is going through what happened in the South post 2008.
Bank multiples are presumably higher than 2.5.

[imtommygunn]

In 2007 subprime rates which were priced at 2-3% went to 5-7%.
The market collapsed and Fianna Fail collapsed some time later. Lehman is what people remember, not the jacking up of rates.
Most ordinary Brits have very little spare cash. On a house worth 400K, 6% is an extra 12k and there are no payrises.
The housing market cannot support 6%. You must be joking.

Anyone who has a mortgage for £400K should be able to afford the hike, if not they should not have taken on such a big mortgage

The same applies to any level of mortgage though. You take what the bank deems you can afford. At that point in time you could afford it - times have (drastically) changed. If the bank is not going to assess you on scenarios like this you are unlikely to apply the criteria yourself.

It's all relative so impacts any amount of mortgage.

[armaghniac]

One way out of this mess in the short term and even possibly long term is too allow those who are heading for trouble to switch to an interest only mortgage.

People choose to forget that interest rates were always going to go up, just as the balmy days of summer are always followed by winter. If you overpaid on your mortgage when rates were low, now you could go interest only and still be on course with fairly consistent payments.

I think the UK lending probably has been more generous than in the South, where the restrictive criteria will prove their worth now, people might feel a squeeze but they should not lose their house and the rest of use will not have to bail out the banks. 

[seafoid]

I don't think ordinary punters are in a position to do that. In other countries banks are mandated to carry out stress tests of +3% for example to see if applicants can afford the mortgage subject to a maximum  of 30% or 40% of income.