Mortgage costs ‘unlikely’ to return to low levels

I’d love a cheap mortgage, but I understand that the country was very privileged when these were being offered. However, the way that Nunn talks about the rates makes it sound very much like the higher interest rates are simply an excuse to make more money after the base rate falls. There is little mention of lenders being cash-strapped, so they need to keep rates higher or any other economic explanation.

Nunn states:

>the average income of a family with a mortgage was £75,000, and so “many of those families have been able to absorb” higher repayments.

Just because a family can absorb higher costs temporarily does not mean they can continue doing it. Plenty of young people want to get into the housing market with a lot less than this.

The other annoying thing with this is we have seen interest rates on savings accounts fall almost back to pre-high base rate levels. So, the cost of borrowing from a bank remains high, but we have no incentive to lend them our money in the long term. This could (but probably won’t) bite the banks. However, it does little to hide that big banks like Lloyds primarily focus on profits rather than customers. It is not the end of the world; that is the nature of business. However, amid the cost of living crisis, with it potentially worsening again with the war in the Middle East, it does not look like living standards will improve again in the UK. Even in the long term, if this is the attitude businesses will take, it does not bode well.

I always try to look for customer-focused companies rather than trying to satisfy shareholders, but they are few and far between, and it would take everyone diligently doing this to enact any change within industries such as banks.

Pre 2000 interest rates were commonly above 5 percent. During the 1970s Labour government it peaked in the 20s percent.

The super low mortgages post 2000 were a historical anomaly only available :

(a) because banks were left lightly regulated and they lent to anyone with a pulse (sometimes not even that) and did not make adequate provision for bad debts.

The 2008 crash ended that party with a huge debt bill from the outgoing Labour government.

(b) post the 2008 crash, governments, including Cameron’s coalition globally printed or borrowed huge amounts of tax payers money to stimulate the economy only fir Covid to crash it again.

Post 2008 crash and post covid, we have much higher government debt which drives even higher interest rates for everyone long term. It also makes government finances very fragile, whoever governs.

We now also have banks who are rightly expected to lend prudently and provide for bad debts, making loans more expensive so that the government doesn’t have to bail them out again.

So anyone who thinks we are ever returning to long term interest rates below several points above inflation is kidding themselves. Lets just hope inflation stays under control now.

comes as no surprise to most people.

I reckon if they get to around 3.5 to 4.5% in the next couple of years, that wouldn’t be too bad for me when my deal is up. I am hammering as many overpayments as I can until then.

But I’ll never expect to see it at 0.5% in my lifetime.

The way to keep costs down is to increase supply of housing.