Hey guys, it's Sasha The UK is in big financial trouble. Last week, the Bank of England increased interest rates from four and a half to five percent and this latest move is sending the UK property Market into free fall. We are staring at what may be the biggest property crash we have seen in a very, very long time, and the most frustrating thing about this collapse is that it didn't have to happen. Many families are going to struggle.

Not because they did something wrong, not because they made a mistake that didn't plan their finances, but because the UK government and the Bank of England have made catastrophic errors that we all now have to pay for. And according to new research, over a million UK households are going to run out of money by the end of the year. Let me tell you exactly how bad this is going to get now. I Know that there are many self-congratulating Boomers out there who will tell you and write comments below that they heroically paid 69 interest on their mortgage back in the early 80s or in the early 90s.

So please stop whining. You don't know how good you've got it, because interest rates are five percent are not exactly all that big. and on the one hand, they're kinda right. If you ignore the last 15 years when the Bank of England forgot to put the raids back up after taking them down as an emergency action down to zero percent after the financial crash, five percent interest rates are actually perfectly normal.

In fact, it's the zero percent rates that we've recently had that are not normal under any sane economic theory. and the Bank of England completely failed at their job for not increasing rates back to something more appropriate after the economy recovered. But there are two problems that make today a heck of a lot worse than the situation in the 80s and 90s. The first problem is that it's not the interest rate that is the problem, but the relative increase in interest rates when it comes to people getting completely over by the Bank of England turning up three years too late to fight inflation.

In 1990, the interest rates hit 15 percent in the UK, which is way higher than the five percent rate that we're seeing today. But before the rate hikes, the rate was already sitting at about eight percent, and that was at the bottom. It was consistently high in the years before that, So if you took out a mortgage at any point in the run-up you would probably be not that far off. probably more like in the 9 10 range.

And it was. Let's say you're paying a thousand pounds for your mortgage at eight percent over 25 years. I'm just keeping the numbers simple here. As an example, when the interest rates went up from eight percent to 15 in 1990.

If you came off your fixed deal at the time, or you had to remortgage the worst possible moment, let's say that your mortgage rate was one percent above the base rate. Again, keeping it simple, so your mortgage went up from nine percent to 16 and your monthly repayment went up from a thousand pounds to sixteen hundred and twenty pounds. So a 62 percent increase. Now, let's do the same numbers for today: if you were paying a thousand pounds per month, when the base rate was at just above zero percent, which is where it was before everything went to.

If we assume all the same things, your mortgage rate is one percent above the base rate. So your mortgage rate was 1.25 and now it's going up to six percent after the recent rate hike, so the increase is a lot smaller. Instead of going up by seven percent, your rate is only going up by four point seven five percent. But because it's starting from such a low Point your monthly repayment is going to go up to 1659 pounds.

So 66 up instead of 62. And that's before the Bank of England does any more rate hikes. it's already higher. The stress on people's mortgages is already worse than during the massive mortgage crises of the 80s and the 90s when loads of people were having their houses repossessed and we had a really dire situation.

And it's worse than that because today, pretty much 100 of all UK mortgages were taken out when interest rates were sat at zero percent. So this shock will apply to everyone, not just some segments of the population. If you're renting, your landlord will have the shock and they will pass it on to you too. And because the rate went up so much so quickly in just 12 months, the relative increase in payment is going to come all of a sudden without any time to adjust.

And the other problem is that because house prices have gone up a much bigger part of family budgets today, you go towards paying rent or paying the mortgage than they used to a few decades ago. Now in the UK, there are three main groups of people. There are people who rent, people who have a mortgage, and people who own their house outright. And the issue is, there is quite a big number of people.

something like a third who own their house outright. You know, all the people, people who have already paid off their mortgage, Rich people, people who've inherited their house. There's all kinds of different parts of the population. Then there are people who have some form of welfare of subsidies, so they either pay little or part of their payments are in some way subsidize based.

So when you look statistics, when you look at average numbers, those don't really mean anything because they bundle all of these different kinds of people together because the average spend on housing according to the ons, is only 17 of a family's budget. But if you look at the typical family that actually has to pay rent or a mortgage which is most normal families, the average that they pay is more like 33 percent if you actually dive into the Ons numbers deeper. So one third of the take-home pay currently or in the data goes to paying for the house that you live in. So when that payment is now about to go up by 66 percent, it is going to go from 33 to 55 of the budget.

And you can see the problem already. Most people just will not be able to swallow that. Most people will not be able to make that payment. And here is the real issue.

The interest rate increase is meant to stop people's spending. That's why the interest rates happen. because the theory says that when prices are running too hot, people are spending too much. So you want to go and try to stop people pushing the prices up.

Everyone is going to the shops and trying to buy the same things which is pushing the price up. So if you stop some of those people going to the shop, the idea is that the increases in prices will slow down. so if you increase rates and people's budgets get tighter, they will start spending less. But the problem is that the situation in the UK right now is very specific and very acute.

and the problem is different because now the mortgage and rent payments are going up from 33 to 55 of house called budgets. This is Bonkers and the truth is increasing interest rates will do exactly nothing to stop people continuing to pay to have a roof over their head, selling your house, buying another house, paying all the taxes, legal fees, moving fees Furniture Bloody blah. All the stress is not the answer and it is not what the Bank of England should be trying to make people do. But then on top of the 55 of your budget that is going to pay for your housing, the average family will also spend 13 on transport, throw in another five percent on council tax, four percent on insurance, and the total goes up to 77.

The latest available data that all of these numbers are coming from is based on household spending from the office National Statistics that only goes up to March 2022. So it's a little bit out of date because you know we've had inflation in our data. Food makes up 12 of the budget, but remember, food is up about 20 in the last year and another five to ten percent if you take it back to the midpoint of the year for which we have the data. So instead of 12, you're paying at least 15 for the food I Bet it feels more like 20 or 25 percent.

if not more Then there's utilities. It was 10 of the typical family budget as of March 2022. But remember that you now pay about three times as much for your utilities because the energy companies are busy profiteering while the UK government looks the other way. So let's call it double at twenty percent.

If we add all of those up, the total now comes to a hundred and twelve percent. So just paying for the bare necessities. Things like a place to live your bills Electricity basic things like food. The average family has to spend 112 of their budget.

so the government of the Bank of England have royally everyone up the ass. You have to pay 112 before you spend anything on clothes Furniture Tech subscriptions, restaurants, alcohol, holidays, and everything else that isn't in the bare necessities pile. Increasing interest rates will do nothing to stop people's spending on rent or paying the huge electricity bill. I Know it's really hard for the dimwits the Bank of England to understand basic like this, but this is the reality in which people live.

You are fighting the wrong problem. The problem with the government in the Bank of England is that those greedy are so far removed from the real world because you know when you're a billionaire, you just can't comprehend what it is for an average typical family in the UK to live in a time of high inflation, they don't understand what's driving in the high inflation. We do not currently have a problem with excessive spend on unnecessary items. This is not that kind of inflation spiral.

Not every single inflation problem is caused by the same things or happens in the same exact way. This is not the issue. We have a different problem. Last week Jeremy Hunt met with some banks and announced a solution.

The solution is this: when you get really and start missing payments on your mortgage, you can go and ask your bank to extend the length of the mortgage or go on an interest-only repayment plan. This is not in any way actually helpful because it just postpones the problem. It doesn't address the problem. It doesn't put anything that will in the future alleviate this problem or stop it from coming back to bite you in the ass.

The banks are the big Winners because all of the customers taking one of those options will end up paying fuckloads more in interest if you extend your mortgage from 25 to 30 years. and maybe if you stop repaying the principal balance for six months paying the interest only without actually reducing your mortgage down at all. Also, when you can't afford to repay your mortgage that is up 70 of the monthly payment, the bank won't kick you out for a year. Wow, thank you! Jeremy Hunt that is so kind.

I Mean you must have hired some really expensive Consultants to come up with that kind of magic solution. Wow, do you want to slow clap with that now? I Know that the UK government can't go back in time and undo all the dumb decisions and things that they did over the last three years. the decisions that have created these problems in the first place. By the way, who was it? that was Chancellor before Jeremy Hunt and the other people who was transferred for a while who all this up I really can't remember who was it? You know that guy who printed a fuckload of money gave it out to everyone, created a financial crisis, ruined the lives of millions of people, and now our savior Prime Minister Richard Sunak is working Round The Clock to undo whatever that guy did back then.

I mean we should be eternally grateful to Rishi for working so hard to solve the issues that that guy created. Anyway, here is what the UK government could have done instead: I mean I sat down for like five minutes before making this video and wrote These down on a piece of paper. and by the way, Jeremy and Rishi if you are watching I suggest you take out a pen because you know I came up with this in five minutes. but I know it's really hard to think of actual Solutions So you should write this down because maybe there's a tiny chance it would actually go in there and maybe bounce around and you might come up with a decision that would actually help people.

Oh my. God Instead of you know, answering every single question by talking about the five pledges that you have before the end of the year. first past emergency legislation to force every mortgage lender to allow existing customers to have access to the best deals available on the market to new customers without having to pass any additional checks whatsoever. There is no good reason why a customer should have to pay a floating rate because computer says no.

Second, ban the 420 different types of mortgage setup fees that currently exist and ban penalty fees for exiting your mortgage before the end of the fixed term. The UK mortgage industry is set up to benefit the banks at the expense of customers. This is really weird. It is quite unusual and I Don't know why people are so against changing this.

You could argue that historically there were maybe reasons why having fixed terms of two to five years would maybe make sense. It would fix cash flow for building societies, prevent sharp asset movements, but in reality people don't go and move into a house and buy it to live in it for two years, so the term of the debt against the asset does not match the intent with which that debt is being taken out. When you go and buy a car, it is very common for you to take out a loan, which, on average will be roughly the sort of time that a typical customer would actually keep that car. Same goes when you're buying a phone or any other kind of thing with a house.

The people who are buying the house. They're taking out a loan for a very short period of time while intending to live in the house for a very long period of time. The only reason this happens is so that the banks can make a load of money in the U.S A typical mortgage is something like three percent over 30 years, and that is a good thing. It means that when rates go up like they do right now, customers don't get over and have to start paying double the money for no particular reason.

I Mean means that there isn't the same kind of pressure on household budgets. People don't immediately become poor because the bank of England happened to raise interest rates and when the rates go down, it also means that customers don't get overly greedy and buy houses they can't actually afford. This is also a good thing. It keeps prices stable.

It keeps household budgets stable. This is also a good thing. And Banks absolutely love fixed term mortgages because they make a shitload of fees. You know, The product fee, the arrangement fee, the valuation fee, the whatever fee.

What the is the valuation fee Anyway, because in 99 of cases, nobody actually does a valuation. There is nobody who actually turns up to your house to go and look your rooms, look at the way the house is constructed, try to understand what it's worth. It's just a fee for nothing. But you know it makes the bank money so you know it's another one that you have to pay.

If you ban the practice of collecting fees up front, banks will have no incentive on giving out short two-year term mortgages. If you then ban the practice of penalty fees for exiting your mortgage early, the bank is then forced to actually do their job I Know incredible and price the long-term interest rates and the long-term risk of something happening in the future to you to the economy to whatever into the rates that they charge. So when the rate goes low, they don't suddenly start offering mortgages at one percent. and when the rate goes through the roof, they don't overprice for the short term.

If the government actually wanted to urgently do something, they can go and do this tomorrow. and instead of remortgaging onto fixed term mortgages at seven percent eight percent. I Don't know how high it's going to go with 3 000 pounds of fees up front, because well, you know the caviar has run out in the bank staff room. People might actually be able to go and remortgage onto a three percent deal over 25 years instead and their payments won't go up by 70 or 100 and people will be Able to plan their budgets without waiting for the Bank of England to them up the ass for no reason.

Whenever the bank feels like it, then while you're at it. Ban Flexible rate lending for retail customers All together. This practice is disgusting. It makes the financial companies a lot of money.

I Know because I've worked in that industry for a lot of my career. Retail customers are not sophisticated enough to work out the probabilities of interest rates changing and how that impacts their ability to repay or what the cost of the debt to them is going to be. So Stop mortgages. Stop Credit cards.

Stop any form of lending for retail customers from being able to be linked to the base rate. Enforce these rates to be fixed, Make the banks work out what the rate has to be from their end, so that their risks are covered so that it works commercially so that they're able to actually offer these products in the first place. Don't make the customer try to work it out instead because most won't and most will make bad mistakes as a result. And let the customers know exactly what the monthly payment on their debt is going to be every single month for the duration of the debt.

If you don't want to get into that kind of thing, just get out of the kitchen. let somebody else go and do that instead. Next, Ban risk-based repricing on credit products. This is already a thing in the States This is incredibly prevalent in the UK especially in the credit card industry.

In the UK your credit card company, you can just decide to increase your interest rate by whatever the they feel like it because they earn more money from it and they're saying wow, We spread our population of customers into groups and you happen to be in a higher risk group according to a scorecard that you're not allowed to look at and because of that, you now have to pay 10 more interest. They are perfectly entitled to do it. According to the law, this practice absolutely sucks balls and it should be banned because it enforces completely wrong kind of credit practice. People are giving out credit cards on low rates because they know that a large portion of this customer numbers will stick around and they will then increase rates on their debt after they've built it up and that's where they make all the money while you're at it.

Pass an emergency law that bans amid contract price increases on any consumer contract. This is part of the problem at the moment, pushing inflation. If you go and take out a two-year mobile fighting contract, you are tied in for two years, but after one year your phone company can just go and increase your monthly payment by 15 because you we're accustomed going amp and we didn't anticipate the cost going up. So they just go and increase the price by 15 because they're greedy and because they basically did a bait and switch and we're seeing this happen all over the place.

If you have a fixed term contract with regular payments, those payments should be prescribed up front in the contract so that the customer knows exactly how much they will be. There should not be a one-way relationship where the company can go and change the terms. The company can increase the rates, but the customer has no recourse to tell the company to off and then go and make it illegal for companies to Jack rates at the end of fixed term contracts. If a customer is on any kind of a subscription product, which is where a lot of our money is going at the moment, it should not be possible for Sky, for example, to go and increase the price of your subscription by 60 for no reason whatsoever.

other than that you are out of contract. This actually just happened to me. for example, because I can go to the Sky website I can select exactly the same subscription product with exactly the same features, exactly the same everything as a new customer and pay a lot less. So the only reason I would not go and do this is because I'm I'm too busy I miss the notification I didn't see the email I didn't see the letter.

Maybe I just didn't notice that the payment went up until six months later because I've been too busy going to work and kids and you know all that kind of stuff. This is pure disgusting profiteering. It is not a good commercial model. It is a disgusting practice.

This is basically a corporate idiot tax. There is no good reason why you should have to pay double for something that you could pay half the price for if you just spend 10 minutes on the phone with the company without actually even changing the product that you're on. A customer should not have to waste two hours researching calling up customer services to get exactly the same subscription at the same price as a new customer. These are the things that are actual problems right now with inflation.

These are the things that are actually people over and you know what? I Didn't have an army of people and didn't spend weeks and months thinking about this because I reckon if I did I'd probably have another 100 different things I could suggest. These are the things that are causing wage inflation spiral. We have massive cases of corporate greed. Everyone's jumping on this inflation bandwagon and trying to make even more money.

That's what they're doing. Water companies that have paid out tens of billions of pounds over many years are jacking up prices to invest in infrastructure. Why didn't they invest in infrastructure before instead of paying themselves out money and dividends? What? The actual Is this? A water company has zero competition. Wherever you live, you only have one company.

You have no choice. You have to pay them whatever they tell you to pay them. They have zero need to invest money other than to you know, tick the box so the government doesn't come at them and tell them they should do more. Instead, they pump out to the Sea literally and pay themselves dividends.

The government should be nationalizing these greedy before the end of the year so that customers who can't afford to pay their bills are not paying more this year so that the water company can continue increasing their dividend payments next quarter, and energy companies need to be brought in line to stop the racket. In the last 12 months, pretty much every Energy company in the UK has posted a record profits. This is not in any way. okay, uh.

winfall tax that is currently being put in by the government is not a solution. It is a temporary slap on the wrist. There should be a regulatory framework which actively limits on a permanent basis the ability for NG companies to make a profit of retail customers. This is not a commercial business where people should be fleeced because there is a cartel of energy companies trying to profiteer when they go.

going. gets tough if the energy companies don't like it. I have a solution for you. You know what the solution is off and you can get nationalized instead.

How about that? Same goes for rail. If I suddenly wanted to go to from London to Manchester on a train tomorrow morning, a one-way ticket would cost me over 120 quid. This is insane. It is cheaper for one person in the UK to drive their car than to go on the train.

This should not ever be a thing. If the UK government wants to try and understand where the issue is. it is not in people being exuberant. It is not in people's spending willy-nilly on things that they don't need.

The problem is that people are and there's nothing they can do about it and the increasing rates are only making the problem worse. But the government are a bunch of corrupt and their mates work in the banks. They work in the Energy company, so of course Richardson the rest of them will do absolutely nothing to stop their mates making bank. And you know they hold shares in those companies too.

The system is corrupt. We are in uncharted waters in the middle of an unprecedented financial problem. But instead of figuring out how to help the people, the UK government has figured out how to help the banks make even more money. Well done.

Never let a good crisis go to waste when you can profit tear off it instead, right? Rishi.