The Cost Of Christmas & The 2015 Housing Horizon

In amongst the melee of political rhetoric, rightly or wrongly I have been left with the general impression that the economy has been getting better. Mark Carney – Governor of the Bank of England – has even warned that interest rates will rise by at least 2% over the next couple of years which can only be a signal of recovery. In fact, wages and growth are looking so good that mortgage owners should expect these increases in the later part of 2015.

But are they? Whilst the economic community as a whole are expecting these changes, it appears that mortgage owners are, in general, not ready or planning for this hike in their monthly outgoings.

Notwithstanding the fact that many are uncertain about the state of their current mortgage repayments, according to the Money Advice Service over half of the people surveyed were not prepared for increases, 47% would find it hard to cover an £150 increase and 19% would struggle with any rise at all. Suffice it to say that a 2.5% base rate would see average mortgage repayments increase to well in excess of £150.

Lest we forget, moreover, that 2014 was the year of the “bedroom tax” which was introduced to tackle Britain’s housing shortage. Those who are living in houses with more rooms than is considered necessary have seen cuts in their housing benefit. As a result, the tail-end of 2014 actually saw the highest number of tenant evictions since records began.

So, as the Christmas blues are kicking in what is on the housing horizon?

In the more immediate future, the housing and homeless charity Shelter has told the Guardian newspaper that “more than 3m households fear missing their rent or mortgage repayments this month”; adding that they have seen a significant increase in traffic to their website over the last few months.

What’s even more worrying is the fact that household debt is still extremely high – one of the highest in the world when compared to GDP. The aforementioned ignorance regarding our debt obligations and the likelihood of future repayment increases is highlighted by our exorbitant levels of spending over the festive period. We have not yet felt the pinch of the increased base rate and have therefore, collectively, decided that we are going to engage in frenzied consumerism on days that were subsequently described as ‘Panic Saturday’, for example.

I suppose we owe it ourselves after a few long years of austerity.

Our lack of preparedness means that some of us are extremely vulnerable however. Many who owe their mortgage to the high-paid job they had pre-recession have been getting by because of the low base rate. What’s more, and as you might expect, borrowers hit hardest by higher interest rates are likely to be those who gain least from the recovery.

So, the message is to be careful I suppose. A quick Google search for ‘base rate calculators’ will take you to a number of websites providing tools to help calculate the impact of a percentage change to your repayment amount. We are all hoping that the Bank of England will be delicate when it comes to increasing the percentage, but this will undoubtedly result in substantial increases for some either way – so be ready!

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