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Comment by richliss | Hacker News Reader

The working and middle classes in the UK have had a lost decade really.

2008 crash followed by austerity going on for way too long when it wasn't needed at all, followed by Brexit, Covid and now this.

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The real issue in the UK is not austerity, but that since 2008 it has been ruled by governments that actively harmed its productivity growth, eventually leading to the current cost of living crisis. Today real wages are below 2007.

The middle class enjoyed a decade of extremely low interest rates on their mortgages.

Covid has been a mixed bag and it has really depended on what sort of job you had. Many in the middle class have office jobs that 'just' moved to WFH and all those people actually benefited financially from the situation (cost of commute disappeared overnight).

I don't think many people have felt any change following Brexit so far...

NOW is the rude awakening: Prices up, interest rates up, back to office. Perfect storm on personal finances. Whilst unemployment is at record low it is predicted to go up as well.

Low interest rates on mortgages means the principal is higher due to astronomical prices.

Expanded access to credit just makes prices rise.

It's audacious to try claim that historically low interest rates have been bad for people with mortgages (which is most of the UK's middle class).

Not gp, but it seems clear to me that that low interest rates are bad for new home buyers, and only good for people holding mortgages as they drop.

That might be what you and gp both mean.

> but it seems clear to me that that low interest rates are bad for new home buyers

Well no. Low rates are by definition good for everyone who borrows money.

Edit: There is a strange assumption it seems that low rates are the cause of the increase in property prices and that there is essentially a bubble. If the banks accept to lend then low rates do allow people to borrow more, but claiming that high rates would be "better" or that this causes unreasonably "inflated" prices are a few steps too far.

Higher rates are not going to help you if you want to get onto the property ladder, and they are not going to help either if you are already on it.

Except the asset you're buying from low interest rates has balooned in value meaning your purchasing power still went significantly backwards.

It's not a stretch to claim that loose, expansionary monetary policy causes asset bubbles.

When buying a home, people care about the total amount of money they will spend. They do not particularly care if the seller or the bank gets their money.

If 'the market' decides a property is worth 3000/month, interests rates directly impact the selling price of the home.

Of course, I'm playing a trick by having the market price the monthly mortgage payment, and not price the property. Some people aren't going to take a mortgage so they care about the selling price only. But I'd argue that most people care about their monthly payment.

Now compare two scenarios: You by a home for 3000/month mortgage with a high interest rate, then rates drop. You by the same home for 3000/month mortgage with a low interest rate, then they rise.

In the first case, you can either refinance if you rate was fixed, or if it's adjustable your monthly payment drops. Any your home value goes up for the reason already mentioned.

In the second case, if it's fixed, that's good, but you lose that rate if you sell,if its adjustable your monthly payment goes up. And your home value goes down for the reason already mentioned.

Absolutely right, there isn't the usual balance of supply and demand setting the price with housing.

There's massively constrained supply, with ever growing demand, for a basic need that isn't optional (shelter). This means that the price is set by how much each potential buyer is able to borrow.

Low interest rates combined with a massive shortfall in house building and add in help to buy and those rates were low for a massively inflated initial asset.

Plenty of people who are middle class got furloughed or let go during Covid. Pretty much everyone I knew who were contractors were let go.

Brexit had an impact before the vote and immediately after the vote because inbound investments were paused, some HQ's were moved to different locations and the pound dropped in value. I'm not taking into account post actual leaving the EU because it's too complex to disconnect the impact from everything else going on.

Now we have a tidal wave heading towards us. Most working and middle class people just don't understand how bad it will get for some of them. Those that worked during covid, saved up and then didn't spend it all post lockdown will probably be ok. The others? Not so much once share prices crash and the boards of directors start making layoffs to get the share prices to rise and to make sure their portfolios are ok.

I'm expecting riots like Brixton, Handsworth etc. again in the UK.

The UK does not have fixed rate mortgages like that. If you don’t think Brexit is the root cause of inflation in the UK I don’t even know what to tell you.

I hate to tell you this, but many countries that didn't Brexit also have inflation right now...

Did you check the baltics? Close to 20%. Did they Brexit?

No, they had Russia invade Ukraine on their borders. The Baltics have had several inflationary shocks even during the “good” times - not least when joining the Euro, everything jumped in price by 30-50%.

Thanks, I know that, and I was replying to the guy saying inflation is because of brexit.

At least Biden is saying inflation is because of Putin, that’s one step less of a ridiculous statement, albeit still wrong.

Inflation is in the same ballpark in the UK, Eurozone, and US... Clearly if Brexit has any impact it is indeed small at the moment.

2% above the more reasonable parts of the Eurozone is not a small impact for everyday people - especially not those who have “done the right thing” and have savings.

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