THE BANK of England monetary policy committee has put up interest rates to 5.25%. This move will add to the pressures on wages which are struggling to keep pace with price rises. Officially the annual inflation rate is around 3%. Unofficially it’s around 4.9%, and with big rises in gas and electricity prices inflation is much worse the lower the level of pay.
This move was largely an attempt to ‘take the heat out of the housing market’. In fact it will add even more to the burden of debt, especially in housing. The average mortgage payment for a two-person household on average income will rise to 14.6% of take-home pay.
That’s similar to the level that caused so many repossessions in the early 1990s. The monthly cost of repaying a £200,000 mortgage, amazingly now the average, has gone up £32 through one government keystroke.
In the past ten years, house prices have far outstripped most people’s incomes – the cost of buying a home has risen by 278%. This is made worse in London by the cornering of two-thirds of new homes by buy-to-let investors who stand to make big profits. Properties have increased greatly in value but most people still buy houses to live in and need to buy another property if they sell one.
Up to now, property repossessions have been at a low level – mortgage lenders have seized ‘only’ 8,000 properties in the first six months of 2006. But the extra cost could push the numbers up to the hundreds of thousands hit by the repossession crisis of the early 1990s under Thatcher and Major.
Housing is being pushed beyond the reach of many people. A socialist society could cancel local authority debts and offer mortgage-holders low interest loans.
New Labour have not only sent house prices rocketing and presided over a record low level of house building, they are also going hell for leather to sell off council housing that could offer a real alternative to the rule of profit in housing. Working people need a socialist housing policy.
See article on website: www.socialistparty.org.uk/2006/464/pp25.htm
