UK banks and lenders suspend offering new mortgages amid market turmoil | Hacker News Reader

UK banks and lenders suspend offering new mortgages amid market turmoil

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29 pointsmellavora53 comments

I imagine it’ll nix all fixed rates for a good lot of years.

There’s a lot of people that are going to be really hurt in the UK this winter. Many will lose their homes, even those that are renting (who probably won’t see it coming).

It’s all well and good to smugly say “you should have understood what you were signing up for” but that doesn’t help people in this situation or their families.

It was already becoming impossible for many people to get by with the fuel increases, a lot of people are going to be pushed over the edge before January.

I’m sorry but I just don’t see how “many will lose their homes”. Mortgage companies are ruthless but not in the business of turfing out families that legitimately cannot afford their repayments.

Evicting people is risky long winded and generally speaking their last option.

Unless you've got some data to back up what you are saying in which case I’ll shut up.

Edit: Lots of replies saying "but they're not charities etc...". Of course I respect that. I also respect that not all lenders are created equal. If you miss a payment to the mafia you're going to get a different reaction than say to Lloyds bank.

I'm referring to your typical UK high street lender. They will not hoof you out of your house if you miss or under pay on one or two payments. Of course, if you do not engage with them and setup a repayment plan - then they will of course take further action.

> Mortgage companies are ruthless but not in the business of turfing out families that legitimately cannot afford their repayments.

German mega-landlord corporation Vonovia announced just a few days ago that they will evict everyone too far behind on payments for heating [1], in order to pacify investors.

Never trust rabid capitalism to keep the people in mind. For the beancounters, all that matters is the current stock price.

[1] https://www.spiegel.de/wirtschaft/nebenkosten-vonovia-droht-...

> too far behind

That could mean anything.

The details are in the article. Basically, the legal framework allows eviction initiation if people are behind in either rent or heating costs ("Nebenkosten") for over two months worth of rent.

Unfortunately, given the exploding heating costs, for some cases you can rack up two worths month of staying behind in rent in just one month of heating costs - and unlike with COVID, rent protection legislation hasn't kept up in speed with exploding costs.

Isn't the alternative to say "you can stop paying us because we're not going to evict you no matter what"?

The alternative would be to say "we won't evict you as long as you can reasonably demonstrate you're doing your best, and we will use our significant political connections to fight for more government aid and/or price caps on energy". This is what common-good organization landlords ("Genossenschaften") are doing now.

But that is not the point of what is going on here with Vonovia. The "problem" that Vonovia and other landlords face is that rent raises for existing contracts are capped at 15/20% over three years, while new rent contracts are capped at 10/20% above the "average rent" aka Mietspiegel, which is determined by looking at the last years' worth of new rental contracts. The result is that many old rental contracts are sitting far below average rents... and now Vonovia can abuse the current heating cost crisis to evict people and put the units at current market prices.

When I lived in the UK my experience was that not only me, but a lot of folks in my age range back then ("young professional") moved all the time. The tenant protections were pretty appalling, particularly if you rented from a private landlord. It does not seem very unlikely that people will lose their homes and have to move.

UK tenant protections are not the greatest, but I wouldn't call them 'appalling'. However, this is talking about people who own their home but have a mortgage.

Well I let other people judge how they are. However to this point:

> However, this is talking about people who own their home but have a mortgage.

Well a friend of mine got kicked out of his house as a renter because his landlord declared bankruptcy. And apparently that person owned 6 other properties and he was not the only one who lost their place of living.

Yeah you are right, I didn't think about that.

> Mortgage companies are ruthless but not in the business of turfing out families that legitimately cannot afford their repayments.

Isn't that exactly the business they are in? In any country.

I mean that's sort of what a mortgage is. If you legitimately cannot ever afford to repay it, well... you will lose the house. That's sort of what the deal is, right?

Eventually, sure. I can’t speak to the UK, but in New York a foreclosure takes at least 8-15 months. You must first fall significantly behind on your payments, then a 90 day intent to foreclose notice, and then the actual foreclosure process. Maybe things are significantly faster in the UK? Seems unlikely that the UK government would allow mass evictions over this coming winter.

> Mortgage companies are ruthless but not in the business of turfing out families that legitimately cannot afford their repayments

No, they're in the business of lending money and making sure it's repaid. They're no charity.

> Mortgage companies are ruthless but not in the business of turfing out families that legitimately cannot afford their repayments.

Are you sure you didn’t mean “that legitimately can afford their repayments [eventually, with penalties]”? (Or perhaps “that temporarily cannot afford the payments”.)

If they cannot afford the repayments, that’s exactly when the lender should reclaim the collateral.

You made an edit, so I’m guessing you reread that part, but it still seems like the opposite of the correct version.

But.. people won't miss one or two payments.

They'll miss one payment, then never make another payment on those mortgages ever again.

If your fuel bill was £800 per year, and you're keeping your family alive on £20,000 (as many are), then it's now almost £2k. That was before any of this happened.

Your mortgage was maybe £250 a month on a variable rate because that's all you could get - and were terrified houses would go up even more if you didn't take it. Now your mortgage is almost £700 per month, and rising.

At the same time, the value of the £20k you earn is collapsing, so the food bills you were already struggling with are skyrocketing too.

Ask any of the folks on here that are based in middle America how much sympathy the system had for them in 2008.

Having forgiving policy only works if the government has enough money to protect you - the money is crashing already and after Truss & Kwarteng's nonsense last week any further support packages will make it.. Venezuelan.

How do you predict those that are renting (you mean tenants right?) to be affected?

I presume they mean the landlord will not be able to pay the mortgage and hence have the house repossessed. I'm unclear on what that means for tenants in UK.

Or maybe thinking that rents might suddenly spike due to increased mortgage costs.

Interest rates have been considerably higher in the past though. What is different now is that people have gotten used to an endless supply of cheap credit and thinking they are well off so long as the monthly payments can be maintained.

Also, the social media pressure to have the apperance of a perfect life doesn't help.

I agree with all of this, and I’d argue that it’s even worse as I very much doubt anyone gave good advice to most of those people before they took out those mortgages.

I mean, sure, some of us know better - but that’s probably because someone along the way made it clear in very stern terms that you never sign anything you don’t fully understand.

When you take out a mortgate now they do an affordability check which includes checking if you can afford the repayments if interest rates spike up, it's spart of the shpiel they have to go through.

Yes, but those interest rates have been affordable. That context of affordability matters. The UK is also basically organised around the profitability of private home ownership. Its the fundamental basis of the current ruling party's support. Anything that threatens property value and rent yield is catastrophic for the economy (as currently organised) and the current government

You're missing a major aspect of the difference now, when compared to the 80's and before, which is house affordability.

Even at peak in the 1980's you were looking at house prices being 5x income at most. (https://www.economicshelp.org/blog/5568/housing/uk-house-pri...)

Now at the UK level you're looking at 7x and in London 11x. That means that increases in interest rates have a far higher impact on affordability.

While that is true, house price inflation has massively outstripped wages. For example, my very first house in 2000 cost £105k. Today that same house would cost £220k. Therefore, what option do people have but to overextend themselves?

But I don't want to help those people or their families. They wouldn't want to help me either and frankly they need that ex-imperial superiority beaten out of them at this point.

Title reads like all banks have ceased trading mortgages, which is ludicrous. here's a BBC article with a more reasonable title: https://www.bbc.co.uk/news/business-63041679

A more reasonable title but also no mention of the fact that currencies elswhere are also under pressure.

Because that would be whataboutism. There is currently inflation which is being stoked by the current government who is also making statements which don't add up that then makes financial institutions nervous.

Mortgage rates jumping from 1.5% to 6% in one year is quite a lot regardless of other people's problems. Freezing new mortgage offers during a very volatile period is understandable and also concerning.

The current strength of the dollar against all other major currencies isn't wahtaboutism, is a basic reason for the current situation that has been purposely omitted.

I think you mean the pound, since this is what we are talking about.

The current situation in the UK is due to economic policy from the past 10+ years. Suppressing interest rates to nothing, and encouraging borrowing for extended periods is not fiscally responsible. Make hay while the sun shines unfortunately did not happen, so now the clouds are rolling in there is no buffer.

Look at a graph of USD against GBP, Euro and Yen for the past 5 years. I agree with the general sentiment but this isn't a problem that is exclusive to the UK.

Do we have an article talking about some financial institutions suspending new mortgage offers in the Eurozone?

I'm not saying that inflation isn't a problem elsewhere, I'm saying that the issue in this scenario is that the markets are panicking due to general long term financial mismanagement and doubt over the sustainability of current policy from both the Government and the Bank of England.

Borrowing rates will have to rise, as they have done already in the US, as everyone has been fully aware for sometime.

My confidence in financial institutions ability to see what is clearly in front of them has been severely tested over the past few months.

> no mention of the fact that currencies elswhere are also under pressure

Apparently other currencies under pressure is a sign of

https://www.express.co.uk/news/world/1653931/eu-news-euro-cu...

Last month, the Euro fell to parity against the US dollar last month for the first time in more than 20 years. It has bounced back to €1.03 but is still massively short of the €1.18 hit nearly a year ago.

Eric Noirez, a prominent EU critic and member of the Generation Frexit campaign in France, told Express.co.uk: "The Euro is a system that has reached the end of its tether.

Their policy has consisted of massive monetary creation, and this in a totally unreasonable way ... it will lead to eurozone collapse ... The recession is obvious ... the biggest financial crisis in its history ... An absolute madness!

But when the UK currency is selling off ... https://www.express.co.uk/news/politics/1674629/Liz-Truss-cr...

Presumably all those woke traitor hedge fund managers are to blame.

'They don't believe in Britain!' Tory chairman says tax cut critics are like Remainers New Conservative chairman Jake Berry has given his first interview since being appointed 20 days ago with a broadside at the people who "don't believe in Britain".

It's getting pretty scary over here in the UK. The government's strategy seems like it's in a doom loop. We have inflation so the BoE is going to hike rates and cause a recession to tackle inflation. But the government have announced a bunch of measures to boost growth (whilst blowing up the deficit). So which is it, will BoE win and cause a recession to tackle inflation (thus causing a debt crisis with massive debt we can't afford to pay?), or will the government win and boost growth (presumably causing spiraling inflation?). Meanwhile, the level of uncertainty caused by this simply must be putting off investors?

Not exactly on topic, but a good moment to think - are mortgages even fundamentally desirable? The price of a house is always going to be exactly savings + mortgage, if nobody was taking out mortgages the prices would adjust and people would end up in the same house as before.

It is interesting to ask if mortgages should be rare. It isn't obvious why everyone needs to pledge years of their life to the wealthy in order to own a home. I can imagine alternative scenarios where I own a home without agreeing to give large amount of money to bank shareholders.

Mortgages are the entry point to a world of debt that doesn't make sense. The market keeps trying to draw down debt with financial crisis after crisis and the people in control of the monetary system keep making sure it comes back.

For as long as society thinks home ownership is fundamentally desirable so will be mortgages as most people won't be able to afford a place otherwise. Generally speaking life is so fast and unpredictable for people, that home ownership for many is probably individually a lifestyle choice but a fundamental risk.

So I think if you want to question mortgages, it's better to question the entire idea of everybody being forced into home ownership.

> For as long as society thinks home ownership is fundamentally desirable so will be mortgages as most people won't be able to afford a place otherwise.

Why not? Who do you think would end up owning the houses & how would you expect the market to be structured?

Why, fundamentally, would it look much different from today?

> For as long as society thinks home ownership is fundamentally desirable

I'm in favour of challenging that assumption only iff we make private renting illegal. No one except the public (i.e. the state) should be able to extract payment upon the unlucky masses that do not have or can't afford their own home.

> taking out mortgages the prices would adjust and people would end up in the same house as before

You already can end up in the same house as before without mortgage. Just 20 years later (and in a 20 years older house).

Misleading title. A couple of mortgage lenders have temporarily paused some of their products because of uncertainty about interest rates in the short term.

BofE is holding fast on interest rates despite tremendous pressure to put them up to protect the pound. Many predict they will give in and raise them.

They're probably avoiding an immediate kneejerk emergency raise, which would look like they're panicking. If they wait a little bit before they raise, it'll look more calm and considered which should give the market more confidence.

Time is a factor here, too. The longer they wait the harder it’ll be to get it back under control - which may not even be possible at this stage, given that they’ve grossly underestimated the scale of the problem at every step.

The thing that really worries me is that most people don’t understand how any of this works and are still worried about fuel costs. They have no idea that a further (minimum) 1.5% hike is imminent, and those worst affected (renters/trackers) won’t know that they’re the ones who’ll get wiped out by it.

A freeze on rent increases (like the fuel cap) might be needed, but good luck getting this government to agree to that.

Edit: as I think about it a rent freeze would be great for shaking the exploitation out of the housing market too.

You seem to be talking about inflation rather than interest rates

Both.

Raising the base rate is a tool to reduce inflation. They’re two sides of the same coin.

They are related although the government does not control interest rates, the BofE does.

To be honest I'm not super worried as I can see the inflationary pressure is mostly coming from the knock on effects of the Ukraine which will undoubtably end at some point. Also we're coming off the back of Brexit and printing a load of money for Covid.

I appreciate the downvotes from the landlord who thinks they’re an astute investor and not just exploiting someone further down the wealth pyramid.

For anyone not aware of this - housing is not a free market, especially in the UK (your tenants are universally forced against their will to rent from you due to nimbyism).

Why are landlords exploitative?

Nobody is being forced against their will to rent a property they don’t want.

Tenants already get plenty of protections that are only due to be strengthened.

Should choice really be limited to owning an expensive asset or accepting whatever the government is capable of providing (council houses aren’t looked upon fondly). What you refer to as exploitation I’d see as freedom of choice.

It’s exploitative because your counterparty does not have the luxury of choice.

The people who actively work the system to prevent new construction are the same people collecting rents from tenants left without options because of bans on construction.

NIMBY attitudes aren't confined to landlords. That's quite a common sentiment among homeowners. People working to secure their best interests shouldn't come as a shock.

There are plenty of options for people looking to get on to the housing ladder including government backed schemes that require deposits as low as 5%. If someone is incapable of saving a 5% deposit, are they fiscally responsible enough to own a home?

GPB to Dollar seems to have levelled out and started coming back slowly so I guess they might get away with it. As the dollar is also up against Euro and many other currencies, possibly due to it being a default 'safe port' in uncertain times, I guess they're trying to take a measured approach.

It's really difficult to judge the GBP:USD rate, because it started sliding yesterday, and then it looked like there would be a BoE intervention, which caused it to recover. So it's a sort of catch 22, if it gets really bad the BoE might intervene, if the BoE does intervene, it'll rise because of the intervention. So it sort of levels out at "This is the lowest we can get without pricing in the BoE doing an emergency hike". It's very difficult to tell what is driving what.

I despair at what the cumulative actions of a good number of assholes have done to a once Great Britain. It's over.

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