[Re: Mortgage time-bomb UK’s top threat, yesterday]
I agree that rates will go up in the future, but when will they stop rising? If rates go up to 7 per cent, those who took out mortgages 10 years ago will generally manage. It’s the younger generation who will get hit hardest. Those who took out mortgages at the height of the boom will struggle to survive and many properties will be pushed into negative equity.
What does our wonderful government do in these circumstances? It doesn’t encourage people to deleverage ahead of the crisis. It encourages more borrowers into artificially low rates by guaranteeing 95 per cent loan-to-value loans. When interest rates go up, house prices will decline and this 5 per cent equity will disappear. There’ll be even more foreclosures than there would’ve been without this policy.