This is pretty good

The increase in interest costs for the most vulnerable households makes this worse. And let’s be clear that this policy is targeted on the most vulnerable households, which borrowers and renters always are as they have always the smallest budgets available to meet other costs.

Mortgage interest rates rise. Renters hardest hit.

So, the families and households most likely to be most under stress in the UK will see their bills for mortgages and rents rise rapidly if the Bank gets its way.

Someone’s also going to have to explain how higher interest rates increase rents…..

8 thoughts on “This is pretty good”

  1. It’s entirely counterfactual, isn’t it? It’s the poor who borrow the least It’s the wealthy who carry large debts. A sharp rise in interest rates will see a lot of people who think they are wealthy getting an unpleasant surprise.

  2. Dick Turnip (gimme MOAR of yer money) is 10% right.
    If the rise in interest rates results in fewer people graduating from renting to buying then the demand for rentals increases. Supply is notoriously constrained so rents rise.

    OTOH in the medium / long term property prices stabilise or decline when interest rates are high. So the effect on renters is nugatory and it’s the buy to let crowd who feel the pain.

  3. “…if the Bank gets its way.”
    Behold the modern Horatius Cocles, bravely defending the Sublician bridge against the marauding horde of macroeconomists.

  4. “the demand for rentals increases. Supply is notoriously constrained so rents rise”

    A so-called Conservative government is doing lots to ensure that the shortage of rental houses will burgeon. It’s doing it by adopting the sorts of policies that the Guardian urges, in spite of the obvious fact that if the Guardian recommends something that something must be dud and might possibly be wicked.

  5. If input costs rise for all manufacturers of a widget, they’ll usually pass on that rise to their customers, safe in the knowledge that all their competitors are doing the same. We see this in practice, eg. airlines increasing fares when the oil price rises.

    Not all landlords have variable-rate mortgages; but sufficient numbers do that they should be able to pass on at least part of the increased cost.

  6. Isn’t the issue that increasingly rental regulations are stopping landlords from increasing rents for existing renters while also making it harder for the landlord to end or not even renew a rental agreement
    Know someone who is thinking of selling his rental property as local regulations mean he can’t pass on cost increases to his tenants who have been there over 5 years and can’t stop them renewing so no option to go back to market and get market rates for him. Apparently even if he renovated he could only increase rent by 10% and has to arrange to rehouse them at no more than what they currently pay in rent during the renovations. And they wonder why it’s so hard to rent locally and rents for places that come up for rental are so high

  7. So any household that is renting or has a mortgage is “most vulnerable” — must account for well over half of all households.

  8. Some bloke on't t'internet

    I find myself wondering if Timmy is being facetious or has missed something here “Someone’s also going to have to explain how higher interest rates increase rents…..”
    As Andrew M says, not all landlords have mortgages, but I would think that those without borrowing are in the minority. Input costs go up, either profit margins go down or output costs go up – that’s basic economics. To be honest, considering the capital tied up, the work involved (I know some would have you believe that being a landlord is “1-rent property, 2-sit back and count the money as it rolls in” – but that’s not the case), and the risks (a bad tenant can trash the place and there’s no realistic chance of getting any meaningful reimbursement); the margins aren’t that high and lowering them isn’t an option for many.
    Then as philip, dearieme, and BniC point out, the current government seems especially determined to persuade landlords to evict tenants and sell up – which leads to a reduction in the number of houses to rent. A very significant proportion of those evicted will also be those unable to afford to buy – so larger pool of tenants seeking smaller pool of properties = higher prices all round until the market rebalances. The fact that those on low incomes, on benefit, and with pets and/or children are becoming even less desirable as tenants – and you quickly see that the policies being pushed by the economically illiterate outfits like Generation Rent and Shelter are actually making things worse for those they claim to be supporting.

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