Recent actions from Liz Truss and Kwasi Kwarteng has wiped hundreds of billions from the markets, pensions have been decimated and at one point 40% of mortgages had been taken off the market, so it was a little bit of a surprise to those of us on the centre and left when we were accused of being part of an “anti-growth coalition”.
Remember we were the fastest growing nation in the G7 before Brexit, now we’re a basket case at the bottom of the G20 for projected growth, only beaten by Russia to last place.
What mortgage payers are facing
Are people anti-growth as Truss claims? We are certainly anti-mortgage rises.
The mortgage rate went up to over 6% this week, the first time it’s been that high since 2008. Remember in 2008 with the reckless gambling that led to banker’s bonuses being limited? These bonuses have just been removed by Truss. Are we now setting the foundations for a repeat of the 2008 crash with bankers taking higher risks in order to gain higher bonuses?
According to Newsnight who used Money Facts, two years ago the average two-year fixed rate mortgage was 2.25%, and as of this week it is a staggering 6.07%. In comparison, a five-year fixed rate mortgage will go up from an average of 2.55% to 5.97% today according to Wednesday’s Newsnight.
So what does that mean? On a £200,000 mortgage of 2.25% you would have been paying around £1,035 a month according to Newsnight calculations. Now if you were to re-mortgage it would be at 6.07%, an extra £406 a month.
About 100,000 people are set to finish their existing fixed rate mortgages every month and whilst these will seem like low levels compared to the 1990s, they are now almost exactly the same as then in terms of mortgage repayments as a percentage of income. I wish I’d known this exact figure last weekend when my mum reminded me of those times and hinted that it was tougher back then.
Now I’m old enough to remember when under previous Tory governments interest rates went up to around 13%. I might only have been around 14 years old but I remember the news where people handed their keys over and walked away from their homes.
Whilst we are not seeing the negative equity of the 1990s this time around, people can get mortgages roughly 4-5 times their earnings, and remember this is coming on top of the cost-of-living crisis where many households – even those not on benefits or low incomes – are already stretched to the limit. I fear for the worse.
So that’s the effect of Trussonomics on what mortgage payers will face, now let’s have a look at how Twitter reacted to Truss’s anti-growth coalition claim.
The UK used to be the fastest growing nation in the G7, and now…
I mentioned above how we were the fastest growing nation before Brexit which was something not missed by Alex Andreou who was spot on by saying;
Before we joined the EEC at the start of the 1970s we were known as the ‘sick man of Europe’ and since Brexit, we are fast returning to that status as shown by the senior editor at the Newstatesman George Eaton;
Most commodities such as crude oil are purchased in dollars, so a weak pound will increase the impact of the cost-of-living crisis. Something that Liz Truss seems to be good at is growing the cost-of-living crisis as it seems that every time Truss speaks the pound grows… negatively, as shown by Nish Kumar;
General Secretary of the Trades Union Congress Frances O’Grady jumped on our position at the bottom of the G20 estimates of growth;
Coming back to mortgages and the awful fact that many of us are now going to be pushed to our financial limits, and for some, perhaps over the edge by the actions of this government that is only one month old. Jolyon Maugham of the Good Law Project gets it spot on: “easy to laugh at Fitch joining the ‘anti-growth coalition’. But having ideologues in Number 10 is no joke – this downgrade will mean higher prices for families and higher mortgage rates for home owners.”
