The banker loving, baby-eating Tory party thread (regenerated)

[The Fun Factory]

For someone who apparently has a PhD in Economic History his first act as a chancellor was remarkably stupid.

Edited September 28, 2022 by The Fun Factory

[Genie]

1 minute ago, The Fun Factory said:

For someone who apparently has a PhD in Economic History his first act as a chancellor was remakably stupid.

The problem is it might not be his idea, his new boss might have said it’s happening and if he wants the job he’s gotta sell it.

We know the government, and the PM are a bunch of turncoats who’ll do and say anything to further their careers even if it means completely changing their positions on major topics like the EU.

[ml1dch]

1 hour ago, CVByrne said:

People who have mortgages and jobs will be able to work out plans with the lenders. The only situation we see forced selling is if these people in large numbers lose their jobs and the supply of homes on sale spikes as a result in a market without the demand.

On a large scale, probably. But there will absolutely be people with mortgages who won't be able to afford this hike in rates. The FCA requirement on lenders is to ensure that a borrower is able to cope with a 2% rise - we're going to be seeing a lot of people going from a rate of 1% to a rate of 5%. So a lot of mortgages have been agreed with no expectation that customers will be able to afford what they are starting to have to accept in terms of payment.

To put it into real terms, a one income household with two children and a salary of £50,000 will see take-home pay of around £3,100 (less, if they are making pension contributions). For most of the last decade that family has been able to borrow £250,000 on a mortgage and is shortly going to see their payment go from around £800 to about £1,350. Add that to a massive increase in electricity bills, food prices - this family probably isn't going to be begging for spare change, but they're likely to wonder if their current living arrangements are sustainable, long-term.

Edit - ignore this bit, it's the rantings of a mad-man.

Something else that I've not seen mentioned anywhere, that is a timebomb waiting to happen - mortgage terms (i.e how long you borrow the money for, not the deal that you take) that were set in the years before the crash are going to end in the next few years. A 25 year term, taken out in 2007/8 will be ending in the next year or two. That's an awful of self-certification / sub-prime / interest only debt that no new lender is going to take on, and an existing lender demanding full repayment of the loan.

That's an awful lot of people who are going to have no option but to sell their house, many of them approaching retirement with no other assets. 

Edited September 28, 2022 by ml1dch

[ml1dch]

14 minutes ago, Genie said:

The problem is it might not be his idea, his new boss might have said it’s happening and if he wants the job he’s gotta sell it.

We know the government, and the PM are a bunch of turncoats who’ll do and say anything to further their careers even if it means completely changing their positions on major topics like the EU.

No, this is very much a team effort. Truss and Kwarteng are bred from the same IEA stable and are completely in-tune with each other on this. 

[CVByrne]

48 minutes ago, KentVillan said:

Not true

On a scale to affect the wider property market it is true. Home ownership levels for the low income is a very small proportion of the total home ownership. Furthermore many of those on low incomes who have mortgages likely have a large amount of equity in their homes.

We are looking at low income families who have bought their homes at fair market prices within the last 6/7 years. As they are the ones without home equity.

The proportion of people fitting that criteria is very small relative to the wider property market. Job losses are the only way there will be a property crash. 

[Genie]

Just now, ml1dch said:

No, this is very much a team effort. Truss and Kwarteng are bred from the same IEA stable and are completely in-tune with each other on this. 

I assume they are in tune because 

1) Truss had to promise it to get elected as PM

2) Kwarteng has to go along with it if he wants to keep the chancellor gig.

We won’t know if he knew inside that it was a terrible plan that would screw the country up. If he’s as well educated as suggested then he must have know what a bad idea it was.

[CVByrne]

8 minutes ago, ml1dch said:

On a large scale, probably. But there will absolutely be people with mortgages who won't be able to afford this hike in rates. The FCA requirement on lenders is to ensure that a borrower is able to cope with a 2% rise - we're going to be seeing a lot of people going from a rate of 1% to a rate of 5%. So a lot of mortgages have been agreed with no expectation that customers will be able to afford what they are starting to have to accept in terms of payment.

To put it into real terms, a one income household with two children and a salary of £50,000 will see take-home pay of around £3,100 (less, if they are making pension contributions). For most of the last decade that family has been able to borrow £250,000 on a mortgage and is shortly going to see their payment go from around £800 to about £1,350. Add that to a massive increase in electricity bills, food prices - this family probably isn't going to be begging for spare change, but they're likely to wonder if their current living arrangements are sustainable, long-term.

Something else that I've not seen mentioned anywhere, that is a timebomb waiting to happen - mortgage terms (i.e how long you borrow the money for, not the deal that you take) that were set in the years before the crash are going to end in the next few years. A 25 year term, taken out in 2007/8 will be ending in the next year or two. That's an awful of self-certification / sub-prime / interest only debt that no new lender is going to take on, and an existing lender demanding full repayment of the loan.

That's an awful lot of people who are going to have no option but to sell their house, many of them approaching retirement with no other assets. 

I agree 100% there will be a lot of pain for many people in terms of their mortgage repayments and in addition to the inflation it'll be crippling to many households. 

The point I've been making is it won't lead to a property crash without significant rise in unemployment. 

 

I don't understand what you are talking about in relation to a time bomb of mortgage terms and something about 2007/2008 and 25 year mortgages. Can you elaborate on that please? 

[ml1dch]

3 minutes ago, Genie said:

I assume they are in tune because 

1) Truss had to promise it to get elected as PM

2) Kwarteng has to go along with it if he wants to keep the chancellor gig.

We won’t know if he knew inside that it was a terrible plan that would screw the country up. If he’s as well educated as suggested then he must have know what a bad idea it was.

There is also "everything has said and done in his career so far", which suggests that he is fully on board with this.

Kwarteng and Truss literally wrote a book together saying that this is how they wanted things to work. 

[ml1dch]

1 minute ago, CVByrne said:

I don't understand what you are talking about in relation to a time bomb of mortgage terms and something about 2007/2008 and 25 year mortgages. Can you elaborate on that please? 

Nah, nothing apart from me accidentally erasing a decade in my own mind. 

We'll cycle back around to that one in 2032. But it'll still be a big problem!

[CVByrne]

40 minutes ago, Genie said:

The problem will be landlords who have mortgages on their rented out houses having to pass on interest rate rises to their tenants (who may or may not be able to afford them).

That's mostly a myth.

Rents are driven by supply and demand. Landlords can't afford to have properties on the market for months so as to get the rent they want to meet the mortgage payments. 

Also rental yields have been very high in recent years so there is headroom for landlords to take the hit too. 

Rents may go up due to a fall off in homebuyers meaning more people rent for longer than planned. Which increases the demand for rental property without additional supply.

[KentVillan]

1 minute ago, CVByrne said:

On a scale to affect the wider property market it is true. Home ownership levels for the low income is a very small proportion of the total home ownership. Furthermore many of those on low incomes who have mortgages likely have a large amount of equity in their homes.

We are looking at low income families who have bought their homes at fair market prices within the last 6/7 years. As they are the ones without home equity.

The proportion of people fitting that criteria is very small relative to the wider property market. Job losses are the only way there will be a property crash. 

Okay, but you've got 2.7m BTL landlords in the UK, 43% of whom only own one property (so can extrapolate that a lot of these people are "small time" landlords who may not have resources to ride out a storm). Surely many of these will sell?

Stamp duty cut and cost of living increase will incentivise downsizing for older home owners (who are less sensitive to house prices anyway, since they're taking advantage of the new property being cheaper).

Low-income homeowners don't need to be huge in number, they just need to be a critical mass, combined with these other factors, and then you get a domino effect. I just think there will be a huge section of the population who can't feasibly dig their heels in, because they're already stretched to breaking point.

There are lots of factors here that imply supply will be strong while demand falls, despite strong employment figures?

And remember, rising interest rates to tackle inflation usually means a sharp rise in unemployment, anyway, so then you will have the effect you describe on top of what I've outlined.

It all points towards a housing market crash in 2023/24 IMO.

[Genie]

2 minutes ago, CVByrne said:

That's mostly a myth.

Rents are driven by supply and demand. Landlords can't afford to have properties on the market for months so as to get the rent they want to meet the mortgage payments. 

Also rental yields have been very high in recent years so there is headroom for landlords to take the hit too. 

Rents may go up due to a fall off in homebuyers meaning more people rent for longer than planned. Which increases the demand for rental property without additional supply.

I’m not sure it’s a myth. It’s a fact. Some landlords will find themselves in a situation where they can’t afford to rent a property at a loss. 

Either rent goes up or they sell.

[KentVillan]

3 minutes ago, CVByrne said:

That's mostly a myth.

Rents are driven by supply and demand. Landlords can't afford to have properties on the market for months so as to get the rent they want to meet the mortgage payments. 

Also rental yields have been very high in recent years so there is headroom for landlords to take the hit too. 

Rents may go up due to a fall off in homebuyers meaning more people rent for longer than planned. Which increases the demand for rental property without additional supply.

Sounds good on paper, but the rate of non-payment will likely go up, too.

What we'll see in the rental market is a lot more downsizing and another surge in HMOs (flat shares, etc) as people try to squeeze things down to a manageable budget.

[Genie]

9 minutes ago, ml1dch said:

There is also "everything has said and done in his career so far", which suggests that he is fully on board with this.

Kwarteng and Truss literally wrote a book together saying that this is how they wanted things to work. 

I knew about the book but haven’t read it.

Im sure there are economists who talk about cutting taxes to stimulate growth when the time is right. I could imagine a scenario where that works well. 

The problem is they’ve tanked the currency because it’s completely the wrong time to do it. The markets immediately react as such. Nobody sensible thinks now was the right time, I doubt they did too but they had to follow through for their own personal career ambitions.

[CVByrne]

6 minutes ago, KentVillan said:

Okay, but you've got 2.7m BTL landlords in the UK, 43% of whom only own one property (so can extrapolate that a lot of these people are "small time" landlords who may not have resources to ride out a storm). Surely many of these will sell?

Stamp duty cut and cost of living increase will incentivise downsizing for older home owners (who are less sensitive to house prices anyway, since they're taking advantage of the new property being cheaper).

Low-income homeowners don't need to be huge in number, they just need to be a critical mass, combined with these other factors, and then you get a domino effect. I just think there will be a huge section of the population who can't feasibly dig their heels in, because they're already stretched to breaking point.

There are lots of factors here that imply supply will be strong while demand falls, despite strong employment figures?

And remember, rising interest rates to tackle inflation usually means a sharp rise in unemployment, anyway, so then you will have the effect you describe on top of what I've outlined.

It all points towards a housing market crash in 2023/24 IMO.

I can't see many of the Landlords selling. As stated above they've had very favourable yields on these properties to date. They will get squeezed for sure. 

But sell the property and then do what with the cash? Let inflation devalue it rapidly? Put it into stocks and crash with those? 

Interest rates won't be staying high for too long. The recession will crush demand and result in a drop in interest rates by end of next year or early the year after I would say. 

This isn't a return to 5% rates for 5+ years.

[mrchnry]

Bloke from the IEA on the news just now was blaming everything thats happening on the labour government in 2008. 

Thats gonna be the tory line isn't it. 

[HKP90]

1 hour ago, The Fun Factory said:

For someone who apparently has a PhD in Economic History his first act as a chancellor was remarkably stupid.

Depends what the objective was. If the objective is to make rich people richer, it was remarkably effective. 

[ml1dch]

 

[CVByrne]

5 minutes ago, ml1dch said:

 

Yay, inflationary move from BoE to drive down Government bond yields when it needs to be fighting inflation.

Absolutely clueless this Government 

[pas5898]

5 minutes ago, ml1dch said:

 

QE mk 2. Watch inflation. Double whammy