Struggles to increase house prices as purse strings tighten…
Rightmove has noted that the price increase of UK houses is virtually non-existent, while consumers are still trying to figure out how to budget tighter living standards. Not only this, but because of the of the suggested stagnation of house prices, the Bank of England are now considering to raise interest rates to ‘keep inflation in check’! According to the Independent, unemployment is currently at a 42 year low, but with actual pay increases being minimal there has actually been a reduction in public income. Though I am no expert in economics regarding inflation, I can still look at the reality of home buyers/sellers and see that it seems to be that they are facing a form of punitive measure here. You are struggling to cope currently, so let’s propose an increase to mortgage interest rates! I (as I’m sure everyone is) am not a fan of the method of interest.
I took a look at my student loan balance the other day. I was the first cohort of university students to be lamped with the £9,000 a year tuition fees. I come from a low income background, so I was entitled to all the financial perks and grants that university currently offers to the financially disadvantaged. My fees for the first year of university were slightly reduced, some of my maintenance loans were converted to grants, and I was part of a student bursary scheme which offered me £500 a year over two payments. So with all of these reductions and grants my current balance shouldn’t be too bad? Wrong. With interest rates being somewhere between 3% and 5% on ‘Plan 2’, in less than a year since my own graduation my balance currently stands at north of £40,000. For a quick mental maths, 3% of that balance is £1200! This is something currently out of my control, I can’t afford to start paying back my student loan as I am not quite at the £21K income threshold to pay it. Such is the same for those paying their mortgage. I know my mother has been concerned for years that all she does is pay the interest of her mortgage, and sadly she is no closer to owning her own home now as she was a decade ago.
I think it is a bizarre concept to charge somebody even more, when the majority make ends meet just to cover their minimum payments. I read somewhere once that a loan agreement of any kind is the only contract in existence that all failures fall onto the beneficiary of the loan, with absolutely no consequence to the lender. It provides a framework for irresponsible lending, and why not? If the person who took out the loan can’t pay, they just keep getting charged more and more. So if house prices aren’t increasing because people are skint, increasing interest is surely the antithesis of a solution?