How does the increase in mortgage rates in the UK affect the housing market in this country?
How has the economic program of the new Prime Minister Liz Truss affected the UK economic indicators?
What has changed in the homelessness index in the UK during the past months?
The housing crisis in the UK is dangerous. The jump in the interest rate in the UK, which has a direct relationship with the mortgage instalments of millions of households in this country, has faced this country with a housing crisis and the aggravation of the problem of homelessness. Before the war in Ukraine, the Bank of England predicted that the inflation rate would be in the range of 2%. But it is expected to reach 22% by the beginning of next year.
Increase in mortgage rates
The housing crisis in the UK is directly related to the increase in mortgage rates. Mortgage rates in the UK are rising rapidly. According to the latest statistics, the proposed rate of two-year mortgage contracts has reached nearly 6%, which is about six times higher than last year’s average. This increase means that, for example, the monthly instalments of a £200,000 residential unit have increased from 800 pounds to 1,300 pounds per month. This is while the people of the UK have been struggling with a sharp increase in the inflation rate since the beginning of this year.
The controversial economic plan of Liz Truss
The economic plan of Liz Truss has led to a deepening of the housing crisis in the UK. Since December last year, the Bank of England has gradually increased the interbank interest rate from 0.1% to 2.25%. But this amount is expected to jump to 6% in the coming weeks. A significant part of this development is attributed to the controversial economic plan of the Liz Truss government, which is based on tax cuts for billionaires and deductions for the living allowance of the low-income classes for the country’s economic boom.
Increase in homelessness in the UK
The housing crisis in the UK has caused an increase in the number of homeless people. According to the Office for National Statistics (ONS), 6.8 million households in this country have mortgage loans. 4.8 million households live in rented houses, and most property owners have mortgages. This is while the index of homelessness in the UK has been increasing in recent years, and it is said that it has increased by 11% in just the last three months.
The problem of homelessness in the UK
The latest government figures show that 74,230 households in the UK became homeless or at imminent risk of homelessness between January and March 2022. Of this amount, 25,610 families have children. This statistic shows an 11% increase in the last quarter and a 5% increase compared to the previous year’s period. The housing crisis in the UK has many social consequences for the British.
Risk of homelessness despite full-time employment
Karen Betts, Chief Executive of the Food & Drink Federation, emphasized in a meeting with representatives of the Business, Energy and Industrial Strategy (BEIS) Committee of the House of Commons that this winter in the UK will be harsh. The latest government data on homelessness also showed that 10,560 households are at risk of homelessness despite working full-time. The highest number of people in full-time work registered as homeless since the government began recording the data in 2018.
The risk of homelessness for renters
In the housing rental sector, the situation is worse. One out of every four households (equivalent to 18,210 homes) is homeless or at risk of becoming homeless. This has increased by 94% over the past year and is the second leading cause of homelessness in the UK. Polly Neate, chief executive of the Shelter, says: “Too many people are losing the battle to keep a roof over their heads – struggling to pay rent and put food in their mouths.”
The emergency housing crisis in the UK
The housing situation in the UK is an emergency, and thousands of people were homeless before the cost of living crisis. Rising mortgage payments, record rents, and inflation are straining more people working hourly. The Evening Standard reported that one in seven tenants in the UK saw their rent increase in a few weeks or in August.
An increase in the rent of the British
Evening Standard quoted the shelter charity as saying: Some 13 per cent of people surveyed for the charity between July 29 and August 17 said their rent had increased in the last month. According to the survey results, among more than 2,000 renters, nearly one-third (32%) said that at least half of their household income is spent on paying rent.
The hardships of the British in paying the rent
Three out of 10 renters (30%) said they always face difficulties in paying this amount or are close to this situation. This survey shows that 42% or two-fifths of tenants have experienced a rent increase in the last year (2021), and one in 10 people (10%) has faced a monthly rent increase of more than £100.
Destruction of tenants by excessive rent increases
According to Polly Neate, the high cost of rent for residents means walking a tightrope while trying to continue living with the increasing prices of food and energy. These outrageous rent prices will destroy many tenants. With the increase in mortgage rates, people’s debt to the bank will inevitably increase, and the forced sale of housing will increase in the next two years.
Reducing the purchasing power of Europeans
Consecutive breaking of the inflation record and the experience of inflation stagnation are part of the current tensions in the economy of the Green Continent. This situation reduces the purchasing power of European citizens and is expected to become a widespread crisis with the increasing challenge of gas supply from Russia. In the meantime, the citizens of some European countries experience more challenging conditions than their other neighbours in this continent, the experience breaking the inflation record of the last few decades, which analysts call staggering.
The housing crisis in the UK is due to the failed economic reforms of Liz Truss. This is while the government’s reforms have led to a sharp fall in the pound’s value and turmoil in the country’s financial market, at least in the last two weeks. The Bank of England, which evaluates and updates the interest rate monthly according to the economic situation, announced that it would increase the interest rate at any point if necessary. This is what worries experts about the housing crisis in the coming months.
