Last month on average property prices rose 1.8%. Some people are now seeing their wealth increase by a greater rate than their incomes, simply due to the increasing valuation of their properties.
Apparently profiteering irresponsible banks are now giving people mortgages at 6 x rate of their salary, and in some case more!
Lets assume that you earn a modest sum of say £30,000 per year. Lots of people earn way below this, but its useful for the purposes of what I'm saying.
At a rate of 6% a mortgage on a loan of £180,000.00 would cost you over 300 months (25 years) about £1159.74 per month.
Your post tax net income from your wages would be in the region of £1840 per month leaving you around £700 to cover food costs, council tax, electric, gas, clothing, holidays and any other thing requiring a £ note. Not a lot to play with is there. Add kids to the equation and it becomes tighter still.
Now, imagine that rates went up by just 1%. You'd then have to find a further £111, at 2% its £230, 3% its £350. Basically for every extra % point it goes up you'll have to find £110. You think this unlikely? Just look back to late 80's and early 90's for a glimpse of what can happen to moneymarkets and interest rates. They are extremley volatile to say the least. Under a Tory chancellor in the late 80's interest rates hit a whopping 15%! Under that kind of rate our sample repayment rises to a staggering £2300 per month you'd need to earn an extra £500 per month simply to pay the mortgage!
The banks don't give a shit of course, they are quite happy to give mortgages for 90% of property value as they simply cant lose. If mortgage rates rise, or you lose your job and you can't pay, then they get the property to sell on, whilst you are evicted along with any shortfall liabilty arising.
That's the nightmare scenario. The other scenario is that rates again would rise, albeit not excessively, yet excessive enough to put you under considerable hardship. Where this happens, property prices fall, thus leaving you with a negative equity.You can't even sell to lessen your liabilities, you are stuck, up the creek without a paddle.
How is such an insanity allowed to prevail? Where I ask is the responsible lending there?
A roof over ones head is one of lifes fundamentals. Mortgages at those rates are irresponsible. The people who are forced to take them on often have little other alternative.Where is it all going I wonder.
Perhaps its a product of the I'm alright jack attitude that prevails. Many people are quite happy with the status quo. Lots of home owners have seen their homes and investments rocket and are now sitting pretty. A substantial number of people are not, and struggle through with an array of secondary less appealing options.
Can such stratifications be good for society? What future for our children and people unable to access the opportunities that such access to wealth brings. Do we want a ghettoised society. Do we want gated communities like they have in places like California
Where are the policies that will unite and integrate I wonder? Obvious really I guess, such policies don't exist. They simply aren't compatible with an unfettered free market economy.