Anyone who has lurched through all manner of terrifying economic unpleasantness, white-knuckled, with a fraying seatbelt tightly fastened and grabbing at the oxygen masks will be a little taken aback by recent financial events.
Mortgage carpets are being wrenched from underneath innocent people’s feet because the retail banks have stopped trying to even guess at what’s going to happen next and have hit the big red Stop Everything and Hide button. Maybe not forever as they are in fact waiting for things to calm down and it is perfectly possible, indeed very likely, that rates will slide back down in a week or so. Hopefully they won’t be the 15 per cent I was paying in the 1990s.
However, it is not the case that every single borrower in the country is being forced to pay triple their current monthly mortgage payment from right now or face appalling consequences. Anyone on a fixed rate of less than 5 per cent for a while may be dancing in the streets, but those with variable rates? That’s a very different situation, although anyone who willingly chose that option and watched the Bank of England up until now hammer interest rates to almost nothing might, until fairly recently, have also been dancing in the streets.
Newspaper reports are designed to attract attention and be as depressingly cataclysmic as possible. The Times reported Huw Pill, Chief Economist at the Bank of England, as saying there would be a significant monetary policy response in ‘an attempt to shore up the pound’. This seems to imply that shoring up will be a failure before they’ve even given it a go, indeed, Kwasi Kwarteng has ‘suggested’ that markets had ‘over-reacted’.
But are we going to see an ‘almighty crash’ in the housing market? Looking at my area of interest, Central London, we are watched like hawks from overseas by people who take a long term view and can sense a bargain. Americans and their dollars are circling Kensington & Chelsea where few people are distressed or prepared to sell for less than they think their property is worth. At the same time, agents are very firmly asking if buyers are in a position to proceed and those that aren’t will not get a look in, bargain or not.
No-one should under-estimate the impact on those who are trying to work out whether to worry more about an increased monthly mortgage payment or being told the value of their home has been reduced to rubble. Times are biblically different from 1981 when Norman Tebbit could say ‘get on your bike and look for (more) work’ without thinking or caring who he might upset. We are no longer so unfeelingly brutal to others as we once were.
The Kwasi Kwarteng Killer Concept that’s just landed on the doorsteps of houses that are now worth a lot less than they were, is based on driving business and innovation which sounds like a promising plan. However, the reaction in the markets fuelling an uncertainty in our current economic climate is not helping our younger generation who are now less likely to get on the property ladder than ever, as well as those who already are. Nonetheless, although it seems to be all gloom at the moment, that does not mean that it will all end in doom.
