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

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

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.

*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.

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.

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.

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.

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 ).

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.

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

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.

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.

Yes, excellent post Doodledog.

I meant even 110% mortgages…….

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.

"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!

Great post Doodledog.

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.

The above was in reply to GSM.

Of course your first sentence is true. We do only know what posters tell us and only get impressions of them by how they tell us. That is why, when you told us you had gone through tough times, I felt for you. When you said or implied you climbed out of it with no help whatsoever (until I mentioned your previous comments), I was even more sad as, either you had been very alone or you had not recognised those who did help you.

You are surprised I remember, but you do tell us much and often. And you should be proud. I love it when I hear about women who have taken up extra education later in life. Many didn't have the same opportunities earlier on and I would plaster their pictures everywhere as inspiration for others.

However, it grates on me when people use culture war tactics to attack others and this is how you, and others, come over. The nail varnish was an example as I clarified. Your attacks are usually money orientated. But one is not better than the other. People have and will always do things differently and even of those who do the same, some will fail and some succeed.

The most successful people I know are happy to admit that they were lucky with their timing, there chosen skill-set, in one case very much thrust upon them, and the people that helped and guided them along the way. In each case I would say their ability to accept both Duke and dustman, understand people and play to their strengths and the ability to understand their own weaknesses is why they have been so successful.

I hesitate to get involved in threads about economics, as I am the first to admit that I don't know a lot about it. Probably most people don't, yet these are the threads where posters are accused of all kinds of nastiness simply for disagreeing. I know that politics and economics (along with political philosophy) are intertwined, but sometimes people's views are far more visceral than theoretical when it comes to personal finances, as they are about security and often self-worth, too.

Accusations of 'not caring about the rich getting richer and the poor getting poorer' for instance are hurtful (and I don't buy the 'just letting her have a chance to defend herself' line, I'm afraid ) and some of the things said about GSM have been entirely unnecessary, too.

I think that most people want a more equal society, but disagree on how that can be achieved, largely based on our own experiences, which will differ. Not knowing (or not agreeing) that if X policy is put in place then Y will happen to Z group of people is not a crime. It can be a lack of knowledge/understanding, or just a different perspective.

I am no shrinking violet and I like a good debate, but like most people I don't like being shouted down or having sarky or unpleasant insinuations made about my motives. I will happily listen to explanations if I am not expected to take them as gospel, and on this topic I am actively willing to learn, as I recognise my own ignorance.

Basically, however, I think that life is not fair. Some people work hard for little reward, some work very little for high rewards, some can't work at all, and some just don't want to. Some are born with lucrative abilities and others are more challenged. Some have wealthy and supportive parents and others don't, and so it goes on.

Those with money want to keep it, which is understandable, just as those who don't want to have more, and that's understandable too. If I have a fridge full of food and someone hungry asks for a meal I will happily cook them dinner and they'd be welcome to bring their friends, but if I am down to my last block of cheese and loaf of bread I will feed my family first, and hope that they would do the same for me.

As Economics is basically about taking from one group and giving to another, much depends on whether, as individuals, our fridges are full or empty. We can all be generous if we have enough to share, but get more protective of our own when we have less, or can see penury on the horizon. Speaking purely for myself, I fear poverty, and have done as much as I can to protect myself from it whist still working to live, rather than living to work. I am far from being rich, however, so I resent the idea that it is 'fair' that what savings I do have (which are all from earned income) have should be taken away by making me pay for things that those who don't have savings will get free. That is a race to the bottom, and I would hit the bottom long before someone with an inheritance or other cushions would do. I fully appreciate that there are many people with less than I have, however, who have had no chance to save. I would very much like to make the 'playing field' more level for everyone, but I also resent having to pay for those who expect to get everything given and 'choose' not to work. My feelings are just that - feelings - based on my own upbringing and particular life experiences, not on Economics textbooks, just as others' feelings will be based on theirs. That doesn't make anyone right or wrong. They are just different points of view.

DaisyAnneReturns

I know you don't feel you have never got anything wrong GSM. However, you, and others on here, do seem to have issues with others you don't know and about whose circumstances you have no idea. Even though that is the case you all seem to feel free to criticise them for not being you (plural).

The outright snobbery of criticising others for, for example, the wearing of nail varnish, is something I thought had died out with increased education. Obviously not.

You don’t ‘know’ any such thing Daisy. Of course I have made mistakes - we all have. All you know about me is what I have posted GN, but you seem to keep a mental note of things I have said which I find very odd. For instance you have accused me of ‘boasting’ that I was once very hard up. That was not a boast, it was a statement of fact made in a particular context, but you decided to retain it in your mind to bring out and twist to suit your purposes at a later date. If anyone has a problem it isn’t me.
Have I ever criticised anyone for wearing nail varnish? No. Twisting words again. Criticised for spending money they can’t afford at a nail bar, yes. That’s very different.

foxie48

Norah what's a "perceived advantage"?

No idea - you brought up huge advantage. Our children have had no huge advantages. I merely said "I hope and pray they don't feel superior to others - no matter any perceived advantage anyone started with."

don't

Norah what's a "perceived advantage"?

I know you don't feel you have never got anything wrong GSM. However, you, and others on here, do seem to have issues with others you don't know and about whose circumstances you have no idea. Even though that is the case you all seem to feel free to criticise them for not being you (plural).

The outright snobbery of criticising others for, for example, the wearing of nail varnish, is something I thought had died out with increased education. Obviously not.