Millions of UK homeowners face huge increases to their mortgage repayments as interest rates continue to increase (1)
According to the Office for National Statistics, the average monthly repayment for a mortgage on a semi-detached house in the UK rose 61% to year ending December 2022.
This increase will be even greater now… the news over the last week has focused on how another 2 million people are coming off lower fixed rate mortgage deals between now and 2024, meaning their interest rates are going to increase from around 2% to 6%.
I’m one of these people, my current 2% rate ends in September this year, and I’ll have to switch onto a higher rate, which with my current provider is 6% or 5% on a two year fixed deal. I might of course switch, but that gives me a bench mark, I don’t imagine I’ll get much better than that.
Thankfully my current mortgage is so low that it’s not a big deal for me to manage the increase in repayments In fact if I just extend the mortgage by a few months I can keep my repayments level, which for me means pushing it back from 5 years of repayments to around 5 years and 3 months.
However, obviously I’d rather pay less than more over the next five years or so and it’s difficult to make a judgement as to whether I’m better of fixing now at say 5% for three years, or slightly higher at 5.5% for the full five years, or just going onto the 6% variable rate.
Obviously fixing for a longer period is the strategy IF interest rates are going to go up, while going on the variable rate is best IF interests rates are going to come down.
The problem is I don’t know what’s going to happen to interest rates, but it’s 100% on me to make a decision and 100% on me to bear the consequences of paying more in mortgage interest if I make the wrong the decision.
What’s causing inflation?
The bank of England keeps putting interest rates up because of high inflation, inflation being the rising cost of living.
The government put this down to a squeeze of food and energy because of the legacy of covid and the war in Ukraine putting a squeeze on supply chains, and all of this hasn’t been helped be Brexit making it more difficult to trade with the EU.
Personally I also think there’s a longer term trend of the rise in middle class consumers in countries such as India and China, which will increase demand for all goods and services
neoliberalism is also a problem – as increasing inequality means more wealth sits in tax havens not being used for innovation and more money gets sucked upwards, increasing inequality meaning a higher proportion of our resources go on meat and yachts for rich, which also pushes up prices.
Finally, the UK government has been printing money for years in response to various crises, which reduces the value of the pound. It’s printed almost £1 trillion since 2009 in Quantitative Easing Measures.
In short, there is no obvious immediate end to this inflation crisis because all of the causes are outside of the Government’s control, and many of its responses to global forces over the last decade have made matters worse.
Individualised solutions to Structural Problems (Again)
As to the solutions to the current mortgage crises, all that the current super-rich PrimeMinister Rishi Sunak has is to suggest people should ‘hold their nerve on interest rates‘.
In short, ‘just suck it up’, you’re on your own, deal with it, folks.
Signposting and Sources
This post is really just a general reminder of how damaging neoliberal economic policies are to ordinary people in the long run.
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