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‘A cap of 4.5 to five per cent on mortgage rates is a fair level’ – Star Letter 07/10/2022

  • 07/10/2022
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‘A cap of 4.5 to five per cent on mortgage rates is a fair level’ – Star Letter 07/10/2022
Each week Mortgage Solutions and its sister title, Specialist Lending Solutions, pick the top comments from our readers.

This week’s comments are in response to the article: Government needs to intervene in resi mortgage market ASAP – JLM

Top comment 1: ‘Yes please to intervention’

Sox said: “While I agree we cannot keep expecting the government to bail us out, this mess is the making of the government, so we do need something to happen to calm things down. I also agree that we always knew rates had to rise and that around five per cent was the likely end goal, but to have them rise this fast or to increase them over and above this, is not a good idea.

“We have not yet had a chance to see if inflation has calmed, I don’t understand why the Bank of England feel the need to keep cranking the rates up quite so fast. Once households start to feel the pinch from their increased energy bills and mortgage payments, they will soon stop spending, so this budget, far from ‘boosting growth’, will have the opposite effect and then presumably inflation will shrink back again.”

They continued: “A cap of 4.5 to five per cent on mortgage rates is a fair level and just about doable for most people, after all, this is what the lenders’ affordability model was based on, but also this was based on minimal costs and only essential spending (ONS Figures), such as food shopping, basic utility bills, petrol.

“Not Netflix, Sky, Britbox subscriptions, eating out three times a month, seeing shows at the theatre, cinema, several holidays a year, ordering on Deliveroo twice a week, buying excessive amounts of clothes, getting your lashes, nails, hair done, football season tickets etc. So yes, most households will just about manage an increase in mortgage rates to five per cent but that will be all they manage.”

They added: “We need to be very careful here not to push too far the other way, and to find a balance moving forward, and we need to sort it soon. I personally don’t think the housing market is going to stay very busy for very long, despite the stamp duty holiday.

“Already my clients are thinking twice when they hear the monthly payments and these poor people haven’t found a property yet, so at the moment have no idea what that might increase to next week or the week after. How can you go shopping for a new home without an idea of what it’s going to cost you?

“Imagine doing your weekly shop and having no idea how much the prices might have gone up by the time you get to the checkout? So, yes please to intervention, to calm the waters and level the playing field again.”

Top comment 2: ‘The situation is…largely down to the government’

Anna said: “We cannot expect the government to keep stepping in and handing out money. What we do need the government to do, is to stop interfering in the housing market. It is their interference that has ultimately driven up house prices by the introduction of Help to Buy and the stamp duty holiday.

“This has resulted in the majority of people borrowing the maximum they can in order to get on to the property ladder or move home. Rates now are at levels similar to before the crash in 2008 and were never considered to be excessive or unaffordable at that stage.

“People have just got far to used to making payments at a level that really was unsustainable long term and sadly on properties with over-inflated prices. This coupled with energy price rises, again artificially kept lower to keep the electorate happy resulting in many energy firms going bust, has resulted in the perfect storm.”

Anna continued: “Instead of meddling in areas that they know nothing about they need to stop harping on about home ownership being the be all and end all of life and stop selling off the council stock they have and never replace and start building more council homes.

“The situation we are in now is largely down to the conservative government and the economy has been on a downward spiral since the Brexit vote. A vote that should never have been offered because a large proportion of the population had no idea what it meant to be in or out, and I am sorry to say were sufficiently unqualified to make a decision that would have such a long-term impact on the whole country.”

Anna noted: “Ok, Covid and Ukraine were not their fault, but Boris Johnson and his cronies have a lot to answer for. As for Liz, well we all know she is just a puppet that spouts what she thinks everyone wants to hear without thinking of the consequences. Sadly, it is tighten the belt time for all of us and welcome back to the 1970s.”


Top comment 3: ‘Bring on the protest’

Gotmyvote said: “Well written and I’m sure this echoes the sentiments of lots of other brokers, not all because a vast amount love to harp on about the 80s and how tough it was back then.

They added: “While the lenders are so busy that they have to constantly increase rates, and margins, to cope, I’d like to know how many brokers have constantly increased their broker fee to cope?

“Not many I’d guess because most of us have a conscience unlike the fractional reserve bankers. Bring on the protest, JLM – lead us out of this mess.”

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