UK Politics
General Discussion for politics in the UK.
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[email protected] appears to have vanished! We can still see cached content from this link, but goodbye I guess! :'(
Christ. Glad I'm fixed for the next four years but that's no solace for those affected on trackers etc.
Same here. Although I distinctly remember my mortgage provider asking us if we were comfortable if the interest rate went up. Multiple times. I'm pretty sure they "stress tested" our mortgage payments assuming 9 - 10% interest. Of course we told them it would be hard, but still within our budgets then laughed and said it would never happen.
I've got sympathy for people in this situation for sure... but how have they managed their household budgets and savings such that this is a shock to them? Or have they over stretched themselves with their mortgage?
I remember looking at the 10% stress test on the paperwork and thinking "oof", but feeling a bit safer that people are at least being made aware of this when they take out a mortgage.
This was brought in last year to change the way stress testing on applicants runs. Previously, you had to be able to withstand 7% (iirc, don't quote me), it's now a 1% rise stress test, though the 4.5x salary limits still apply.
AHH interesting that makes more sense then because we remortgaged before those changes in the rules.
As an example, a borrower taking out a two-year fixed-rate mortgage at 2.2% with a revert to rate of 4% would need to show they could afford the monthly repayments on a rate of 7%.
I mean... they ain't going to be coming off onto the 4% 🥲 but stress testing at 7% should still (for the time being) mean that everyone with a mortgage should have been aware of the risks and budgeted accordingly. No?
No-one wants to pay more of course.... I have sympathy for that. I just don't understand the shock that some people are claiming.
Unfortunately our 5 year fixed is ending in the next couple of months, brilliant timing. Tried to apply for a remortgage and the offer was pulled before they processed the application. Great timing!
Can someone smart explain this to an A-level econ student?
The inflation we're seeing is mostly imported cost push, from rising energy prices, cost of raw materials ect, which interest rates should have marginal impact on, no?
The IR is used to impact AD and change demand pull inflation, and is risen to lower investment and consumption and therefor DP inflation, which appears to already be very low.
Why is the BoE increasing IR to counter inflation that isn't demand driven? Is it just to make it look like they're doing something or am I dumb?
An answer from my wife who works in UK finance and spent the better part of the day dealing with this decision:
_The short answer is, this is still the best tool they have to deal with inflation, but it's a blunt tool.
A lot of the inflation is driven by external factors, but part of what they're trying to do, it prevent an inflation spiral where higher energy and food prices feed into a higher cost of other goods... labour... Etc.
Q: Will it work?
Her A: At this point they are very late [as others have said here] and increasingly looks like the only way this works is if they hike rates to a level that forces a recession [yay /s]._
@BenGFHC
They only have one button. Their choice is to press it or not press it. So they press it when inflation is high. You could get a robot to do it. They know it won't work, might even make it worse, but they have no other buttons to press.
Maybe if mortgage payments are twice as high people won't be able to spend as much on anything else and inflation will fall just because less is being spent on food etc??
I'm not clear on how the inflation stats work when modelling the amount of items people buy Vs the price of the basket.