If you look around the internet and conversations you may have had about your mortgage going up in recent years, one theme has been common – Liz Truss drove the mortgage rates up.
The counter to this has been that inflation has been high, base rates have had to counter this, mortgage rates were already going up and have gone up since, there was a war in Ukraine, energy prices shot up, and there was still the hangover from the pandemic. Other commentators, mostly on Twitter, since oddly rebranded as “X” have offered other underlying financial reasons, that I do not understand as I’m not a fiscal expert, but I don’t feel that these have been particularly convincing.
What we do know about what is commonly called “Liz Truss’s disastrous mini budget” of 23rd September 2022 is this:
- Truss and her chancellor, Kwasi Kwarteng, proposed £45 billion of unfunded tax cuts.
- They did not inform the Bank of England about the “mini budget” and the Office of Budgetary Responsibility (OBR) was also kept in the dark.
- The markets lost confidence in the UK.
- The pound dropped to its lowest level against the dollar in 37 years!
- Yields on gilts (UK Government bonds) rose to levels not seen since the 2008 economic crash.
- The 0.5% increase in Government borrowing would add £5 billion a year to UK public borrowing.
- Their cut in basic rate income tax from 20% to 19% would have cost the economy £6 billion a year.
- Corporation tax freezes at 19% would have cost further £18 billion per year.
Kwasi Kwarteng lasted only another 21 days and Mary Truss just 27 days after the mini budget.
Over 18 months after the issues she caused, she admitted that she spooked the markets but denied driving up everyday peoples’ mortgage rates, defiantly saying
“I question the premise of what you’re asking me, because mortgage rates have gone up across the world.”
Ultimately, she made a massive gamble and it didn’t pay off. Her “shot in the arm” for the UK economy was a shot in the head for many home owners. The financial institutions had to make tough decisions to stabilise the economy and incoming Chancellor, Jeremy Hunt, reversed much of Truss and Kwarteng’s reckless actions.
But My Mortgage
I was doing some financial homework today and looked at my mortgage repayment figures since Truss’ budget.
My mortgage had been steadily going up as stubbornly high inflation had set in and the Bank of England had been slow to react.
In May 2022 I was paying 18% more than I had been at the historically low interest rate levels, and by September that year it had crept up by 45%.
October saw a freeze on my mortgage repayment increases, but November they let loose again, jumping another 10% month on month before, in December, jumping another 13% month on month. These were the two largest increases in monthly mortgage payments for me, up a whopping 79% by this time on the post economic crash days.
By September 2023, exactly one year after the Truss budget, my repayments were up by an almighty 141%.
So mortgage rates were already rising as a response to stubborn inflation and base rate interest rate rises. And they have risen since, post-September 2022 budget increases.
However, just after the Truss budget, my repayments spiked by 25%, the biggest increase over a short period in the whole time of the rate and repayment rises. So the Truss/Kwarteng budget did cause the proportionately largest jump in costs for me.
Also, by having far less disposable income because what was once less than 17% of my income being spent on a mortgage and is now over 40%, I have not been able to repay as much of my other debts, so they’re stubbornly high too. Sudden payments such as tyres for the car, an MOT, repairs, school trips for my daughter, etc. are all paid with credit cards. So Truss caused the biggest spike in my outgoings and I still haven’t quite recovered yet.
I remember just after September 23rd 2022, arranging with my lender to get a better rate. They were inundated with calls and they failed to talk with me on my arranged meeting, so I gave up on the and battened down the hatches. I’m still on the same mortgage deal, and my pips are being well and truly squeezed. But I have a plan and I’m making inroads into paying off my mortgage.
I blame Truss. But I also blame the Bank of England. They were too slow to react to the increasing inflation rates back in the day and they are being far too cautious now. As a result, my mortgage is still far too high, my repayments are still too much, and I need greater financial freedom to be able to better pay off what I owe and have some spare money to spend in the wider economy. Only then will I be able to thrive not just survive and the UK economy will start to take off again.
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