Chaos awaits in the housing market

I AM sorry to be voice of doom and gloom but chaos awaits in the Wales and UK housing markets.

House prices are at their highest peak and still increasing weekly and interest rates are at their lowest ever – the Bank base rate is 0.1%. A recipe for a huge disaster if it wobbles. History tells us that almost certainly that it will wobble and soon and I am greatly concerned how big that wobble is and that it will make the slump of 2008 seem like a blip.

The reason is, we hadn’t just come off the worst of a pandemic, that is still going on, with record unemployment, furlough, etc. We are not braced for it.

Anybody over 42 I would guess remembers interest rates at 10-13% when buying a house. Now people have £300,000 mortgages at 2%, many being interest-only. If that interest rate goes up by 1%. . . yikes. You are looking at an average increase of 33-45% on what people pay in monthly mortgage payments. And if it went up by 2% the mortgage payments would rise by 60-75% of what they are now.

All this chaos and the base rate will still only be a very low 1.1% or 2.1%, and the mortgage rate will be 3 or 4%.

This really is a problem if we keep letting the housing market run out of control.

This is what happens when you borrow the maximum you can at the lowest the market has ever been. It is capitalism gone mad and at it’s most dangerous ever.

One ominous factor is we all remember the queues outside Northern Rock bank in 2008. The problem was they wobbled and everybody wanted their money out at the same time, on the same day or week.

No bank has all its depositors’ money in it at any one time. They couldn’t handle the sheer number of withdrawal demands. So they went pop!

Well ominously the countries of the world have all been knocking on the door of the World Bank this last 15 months due to the pandemic, borrowing trillions.

Has this made them skint or skint enough to not fulfil their duties?

What happens to UK interest rates if the World Bank wobbles and world interest rates?

And remember because all borrowing appears to be at the maximum and at a minimal rate, a 1% or 2% interest rate increase could be untenable for the UK market.

Now I am not a financial guru but I am an honorary graduate of the most important university in the world, COK, the College of Knowledge of Life and Experience.

Never forget, it was bored financial USA gurus who in 2006/08 allowed their housing market to bring the world economies to its knees through their actions.

It will happen again and soon. Industry cannot afford the wages it needs to pay its workers now that they need to pay their mortgages.What happens when it doubles? Buckle up.

We need business borrowing to be free rolling and market driven as it is now and the housing market borrowing to be controlled – now before it’s too late.

Jules Plow

Bridgend