MAGGIE PAGANO: Critical time for mortgages amid rising interest rate misery
My phone has been ringing off the hook for the past few days. Friends and family have been calling in a panic because their fixed rate mortgage agreement is ending this year and they are negotiating to re-mortgage.
It’s crunch time. They want to know whether to lock in for another two years, go for five, or move to a variable rate in the unlikely hope that interest rates will drop again next year. Difficult decisions.
Giving sensible advice is equally difficult. Even the Bank of England can’t look that far honestly, but what is certain is that higher rates are the new normal.
What is also certain is that the Bank’s medicine is now working too well and, as we have been arguing in this column, now is the time to stop raising rates and wait for the drugs to have their full impact. But don’t count on it.
The misery of remortgaging: More and more people are in a panic because their fixed-rate agreement is ending this year and they are negotiating to remortgage
Adding to my listeners’ anxiety is the fact that renegotiation is proving much more difficult as lenders are being much more stringent on their credit rating in the hopes that homeowners can avoid defaults or, heaven forbid, negative equity if the House prices continue to fall. And the new monthly payments are going to be gigantic.
A couple has a £250,000 mortgage, so they will pay another £300 or so a month at the 6.4 per cent rate offered.
A young family is facing an increase in mortgage payments from £2,000 to £3,500 a month. Another friend is going to see her payments increase by between £1,500 and £4,000.
True, it’s a huge mortgage, but at the ridiculously cheap 2.5 percent you’ve been paying, it was affordable.
These are big jumps in expenses, so you can see why lenders are looking at every penny of income coming in and going out to ensure homeowners can afford the new payments.
These are just a few examples among thousands. Around 640,000 households have a fixed agreement that ends in the second half of this year. And there are thousands more coming out of their deals next year.
Many homes have already made cuts. Yesterday’s July retail sales figures showed just how much.
Compounded by bad weather, sales rose a paltry 1.5 percent, down from 2.3 percent in June, well below the three-month average and the lowest in 11 months.
The latest figures from the British Retail Consortium (BRC) and KPMG also show that food spending remains robust, with sales up 8.4% and outpacing the 12-month average growth of 7.8%.
However, the BRC monitor also showed the extent to which food retailers are cutting prices wherever they can, and promoting heavily to attract customers to their stores, a hopefully positive sign for next week’s inflation figures, which should drop considerably to less than 7. percent
Consumers are shopping far more than ever before, often at multiple stores at once, to hunt for bargains. (Here’s my best advice for tea drinkers: B&M sells a giant sack of Yorkshire tea for the same price as a large box at most supermarkets.)
However, there was a big surprise. Spending on streaming services and going to concerts increased 16 percent year-over-year.
It’s heartening to know that despite miserable weather and a dismal cost-of-living crisis, we’re still stoically spending on having fun. Very good too, even if it means eating baked beans before heading out.
poldark in flames
Ross Poldark would be amazed: new mines, secure financing and jobs.
Cornish Lithium is backed by the UK Infrastructure Bank and Minerals and Energy Group alongside existing investors with a £53m package.
And there is up to £168 million to come. This means it can start mining lithium, an essential component for making EV batteries, for commercial production.
And it’s good for the region too, where mining is so deeply rooted. The first mining of tin dates from around 2100 BC. C., while the Romans became rich with the trade of tin and copper from the mines.
These trade relations with the Romans are even said to have saved the locals from a military invasion, helping to ensure their fiercely independent spirit.
Fingers crossed that Laura Ashley’s owners, Gordon Brothers, can put together a rescue package for Wilko.
Inevitably, any deal is likely to mean the closure of some of its 400 stores and job losses among its 12,000 workers. However, losing some jobs has to be better than closing.