Increasing the interest rate to 5%, is this really the fairest way to slow inflation?

"Doodledog* please accept my apology if I offended you, it was not intentional and I have used the "rich get richer and the poor get poorer" in previous threads because I believe that it is a real problem in this country, eating away any progress we might have made in equality of opportunity. The rising value of houses fuels the disparity between the families of those who own their own homes and those that do not, however, increasing interest rate in order to reduce inflation IMO puts the burden on the wrong sector of society. As I have said, I would prefer a wealth tax although I'm sure it would be extremely unpopular!

Very good post at 10.56 Doodledog. I agree with what you say. I’m just catching up today, left the discussion yesterday to do a barbecue for my family, and as it moved on with so many posts, I haven’t read yesterday afternoon’s posts, just started again with today’s.

growstuff I remember 100% and even 100% mortgages being offered, and I guess people took them up. I can’t remember when this was, but long after we’d taken out out mortgage on this house, although we’ve remortgaged a few times to get better rates. It’s paid for now as are the mortgages of most Gransnetters from what I’ve read.

I meant even 110% mortgages…….

Yes, excellent post Doodledog.

growstuff

MaizieD

Good post, MOnica

I'm puzzled by vegansrock's statement that 'back in the day' people could get 100% or even 110% mortgages. Back in what day?

Wasn't that one of the things that precipitated the Global Financial Crisis? Uncontrolled credit?

Back in my day you'd have been lucky to get a 90% mortgage, let alone even more. 20% deposit and max 3x salary was about standard.

I had a 100% mortgage in 1982. The flat I bought increased in value by over 50% within four years, when I sold it.

'My day' was mid 1970s.

But we just had a small mid terrace for a year so didn't make anything on it. Then moved to a different part of the country and the marriage broke up.

I remember the 100% mortgages specifically because I remember Mr M complaining vociferously that it was irresponsible of the lenders because rates can go up and down, and because people could easily end up in negative equity.

What precipitated the financial crisis was sub-prime lending. Those with little or no equity were victims of its spread.

Houses didn’t always make profit, especially if you only stayed in them for a short time. Our first house was a two bedroomed terrace and we lived in it for two years. Although house prices were increasing, we had to sell quite quickly since we were relocating and we were knocked down on the asking price which meant we made no profit it.

I know someone who had a 100% interest-free mortgage, and had no idea that she was no closer to owning a brick of her house than she'd been when she took it out. She was an otherwise intelligent woman, but clearly financially illiterate. More to the point, she had not been advised of the implications of her arrangements, and happily remortgaged (to other IF loans) in order to pay off credit cards and other debts.

I can't help thinking that all mortgages and loans should have to have clear T&Cs in large bold type, saying something like 'I understand that this mortgage will not reduce the debt I owe to X bank, that at the end of the mortgage term I will lose my house unless I can pay £X000 in cash, and that I will not own my house until that debt is paid. This should be clearly explained by the broker or whoever is arranging the loan, and maybe we should go back to the days of having face to face interviews instead of letting people borrow huge sums by filling in an online form.

(Foxie - no problem. I have been called far worse on here for having a different opinion ).

Doodledog

I know someone who had a 100% interest-free mortgage, and had no idea that she was no closer to owning a brick of her house than she'd been when she took it out. She was an otherwise intelligent woman, but clearly financially illiterate. More to the point, she had not been advised of the implications of her arrangements, and happily remortgaged (to other IF loans) in order to pay off credit cards and other debts.

I can't help thinking that all mortgages and loans should have to have clear T&Cs in large bold type, saying something like 'I understand that this mortgage will not reduce the debt I owe to X bank, that at the end of the mortgage term I will lose my house unless I can pay £X000 in cash, and that I will not own my house until that debt is paid. This should be clearly explained by the broker or whoever is arranging the loan, and maybe we should go back to the days of having face to face interviews instead of letting people borrow huge sums by filling in an online form.

(Foxie - no problem. I have been called far worse on here for having a different opinion ).

Theses are Interest only Mortgages so the clue is in the name.
All mortgages are now very highly regulated so any consumer would be in doubt about what their commitment will be.
Even thought many mortgages are done on line it is a very thorough process. Face to face may be fine in some cases but many of my husbands clients are spread UK wide.

Germanshepherdsmum

What precipitated the financial crisis was sub-prime lending. Those with little or no equity were victims of its spread.

A film from 2015 called The Big Short is on Netflix at the moment. It is comedy but one with an unhappy ending. It shows the greed of the bankers and traders and how they felt about the "little people". I don't think such lending took place in the UK but I could be wrong.

The other film, with an excellent Jeremy Irons is Margin Call from 2011 which was made over 17 days in the offices of a defunct trading company. The rest of the cast is excellent too.

Both films are worth a look.

Great post @ 10.56 Doodledog, you summed up my thoughts and feelings perfectly.

We watched that Dinahmo, the callousness of the bankers and traders was breath taking wasn't it.

*Theses are Interest only Mortgages so the clue is in the name.
All mortgages are now very highly regulated so any consumer would be in doubt about what their commitment will be.*
I knew this person very well, and can assure you that she didn't know that she didn't own any of her house. I think she may have so keen to 'get on the ladder' that she didn't listen if she was told - I know that I pointed the truth out to her and she was shocked, and went immediately to change her mortgage to repayment. We took out endowment mortgages believing them to be a good idea. Much depends on how things are sold (as was acknowledged by the compensation paid to those who lost out) and customers, particularly if they are young and inexperienced, are not necessarily very savvy.

I agree that face to face interviews are unlikely these days, as apart from anything else, there are so few High Street premises now.

Thanks, Dinahmo - I'll look those up.

Doodledog

I know someone who had a 100% interest-free mortgage, and had no idea that she was no closer to owning a brick of her house than she'd been when she took it out. She was an otherwise intelligent woman, but clearly financially illiterate. More to the point, she had not been advised of the implications of her arrangements, and happily remortgaged (to other IF loans) in order to pay off credit cards and other debts.

I can't help thinking that all mortgages and loans should have to have clear T&Cs in large bold type, saying something like 'I understand that this mortgage will not reduce the debt I owe to X bank, that at the end of the mortgage term I will lose my house unless I can pay £X000 in cash, and that I will not own my house until that debt is paid. This should be clearly explained by the broker or whoever is arranging the loan, and maybe we should go back to the days of having face to face interviews instead of letting people borrow huge sums by filling in an online form.

(Foxie - no problem. I have been called far worse on here for having a different opinion ).

I suspect you mean interest only mortgage.

Borrowing not intending equity build, just pay interest until total mortgage payoff or no mortgage payoff and one owns nothing.

Let's not forget that our PM worked for Goldman Sachs. A key player in the financial markets; markets which have a focus on making money with no regard to their effects on national economies...

Running a national economy is quite different

Oh yes - sorry. I didn't spot the typo even after repeating it twice

She would have received annual statements showing how much she still owed, i.e. the amount she originally borrowed despite all the interest she’d been paying. I suspect that people close their eyes to reality and think of nothing other than being able to tell everyone they’ve bought their own home. They haven’t - they’ve bought a debt for which they will pay handsomely over 25 years.

MaizieD

Let's not forget that our PM worked for Goldman Sachs. A key player in the financial markets; markets which have a focus on making money with no regard to their effects on national economies...

Running a national economy is quite different

At least he has had a job outside of Westminster, unlike many career politicians.

The Financial Market provides a lot of employment, money and the making of it should not be sneered at.

Germanshepherdsmum

She would have received annual statements showing how much she still owed, i.e. the amount she originally borrowed despite all the interest she’d been paying. I suspect that people close their eyes to reality and think of nothing other than being able to tell everyone they’ve bought their own home. They haven’t - they’ve bought a debt for which they will pay handsomely over 25 years.

Yes, and I did say that she was financially illiterate. Borrowing to pay off credit card debt isn't wise either. I think she did bury her head in the sand, but I very much doubt that she is alone in that.

Indeed. Our GDP is heavily dependent on the financial sector. He’s not going to repeat Boris’s famous remark about business. The City is extremely influential.

Germanshepherdsmum

She would have received annual statements showing how much she still owed, i.e. the amount she originally borrowed despite all the interest she’d been paying. I suspect that people close their eyes to reality and think of nothing other than being able to tell everyone they’ve bought their own home. They haven’t - they’ve bought a debt for which they will pay handsomely over 25 years.

However, interest only mortgages can serve a useful purpose.

Example: my husband needed a piece of business equipment, had no cash, mortgaged land interest only, made money using the equipment, paid principal back after a few interest payments.

He still has equipment and land all these years later.

GrannyGravy13

MaizieD

Let's not forget that our PM worked for Goldman Sachs. A key player in the financial markets; markets which have a focus on making money with no regard to their effects on national economies...

Running a national economy is quite different

At least he has had a job outside of Westminster, unlike many career politicians.

The Financial Market provides a lot of employment, money and the making of it should not be sneered at.

Indeed. Well said.

And, apart from his excellent work at GS, dragging in sartorial choices is silly. He's a slim, small man wearing beautifully tailored clothing.

GrannyGravy13

MaizieD

Let's not forget that our PM worked for Goldman Sachs. A key player in the financial markets; markets which have a focus on making money with no regard to their effects on national economies...

Running a national economy is quite different

At least he has had a job outside of Westminster, unlike many career politicians.

The Financial Market provides a lot of employment, money and the making of it should not be sneered at.

I'm not sneering at it. Though I do think it's out of control and inimical to national interests.

I'm just saying that working in it has no relevance to the task of PM. We are not UK Ltd. We are a nation with completely different needs.

We are an important international finance centre Maizie. My son, who is a capital markets lawyer, has banking and fund clients throughout Europe and in the US, Africa and the Middle East - as well as England. When the sector, which is tightly regulated, draws in so much money from all over the world and creates so many jobs, including in service industries, how is it ‘out of control and inimical to national interests’?

Germanshepherdsmum

Indeed. Our GDP is heavily dependent on the financial sector. He’s not going to repeat Boris’s famous remark about business. The City is extremely influential.

The City (which is actually a completely independent entity) needs to be less influential. How has it improved life for UK citizens?

We need to broaden our economy to include sectors which will provide growth in all parts of the UK, not just in a London enclave.

GDP is a meaningless measure for those who have little or no benefit from it.