Hey guys, it's Ashley. The UK is in serious financial trouble. The bank of England just voted to hold interest rates at 5.25 instead of increasing them. This latest move has sent the pound crashing losing around one percent versus the dollar.

And the UK property Market isn't free for I will show you the data that just came out that shows that we are already right now at the start of the worst property crash in a very long time and it's only going to get worse. The most frustrating thing about this collapse though is that it did not have to happen. Millions of families in the UK are now going to struggle. Not because they mismanage their money, not because they did something wrong, but because the UK government and the Bank of England were sleeping at the wheel and made really bad, absolutely unforgivable errors of judgment that the whole country now has to pay for.

New data shows that the number of people who can't afford to pay their mortgage just jumped by 29 compared to this same time last year, the number of buy to let landlords who can't afford to pay their mortgages has increased by a hundred and twenty six percent. So those landlords are now selling the properties and increasing rents. Which means that the UK rental cost in August Rose at the fastest Pace. Since records began, well, records only began in 2016.

So this headline is a little bit alarmist. but you get the point: Jeremy Hunt has officially declared Victory against Inflation. Lowering inflation is never easy because it doesn't happen in a straight line. But if you look at the overall picture since it peaked last Autumn, it is now down 40 percent And that says the plan is working.

but even at six point seven percent, that is a lot of pain for ordinary families who are seeing their shopping bills go up there. Fuel prices go up, and that is why it is essential that we continue to stick to that plan. Deliver the Prime Minister's pledge and the Bank of England's Target get it right down to two percent. But the Bank of England was very close to actual truly increasing rates again at this meeting.

I Got hold of the minutes to the meeting that they just had, and in those minutes it said that five members judged that maintaining bank rate at 5.25 was warranted at this meeting, but four members judged that a 0.25 percentage Point increase in Bank rates to 5.5 percent was needed. Instead, these members judged that overall there was evidence of more persistent inflationary pressures, and they were right. If only one other member of the committee out of the nine agreed with them, then there would have been a rate increase. If you want to read the full minutes of this Bank of England meeting, I will stick a link in the description just below this link to Weeble where you can get up to four free shares worth up to two thousand dollars each.

Thank you to Weibor for sponsoring this video! Weeble Are a huge investing broker that is really popular in United States and they have now just launched in the UK You can invest in over 10 000 U.S stocks and for the first 90 days you won't have to pay any commission at all. After that, the commission is just 2.5 basis points which is 0.025 So if you invest for example, one thousand dollars a month, the commission on that would be just 25 cents to convert your Pounds into Dollars. You will have to pay a 0.35 foreign exchange fee, but you don't have to pay it on every transaction like you do with many other. Brokers You just pay it once you put your money into dollars and can keep it in dollars for as long as you want to buy and sell stocks afterwards and for a limited time.

Right now, Weeble is offering this deal where you can get up to four shares worth up to two thousand dollars each just for signing up, making it a positive any amount and making one trade. Now the truth is, it is very unlikely that you will get a two thousand dollar stock, let alone for two thousand dollar stocks. You never know. but you will get four stocks worth a minimum of five dollars each.

So Weeble will literally pay you a pretty decent amount to trade the platform out to see if you like it. Make sure you go and use my link in the pin comment or in the description and as always, your capital is at risk. Alright, so here is the big problem with the UK mortgages. Just before this Bank of England meeting, we got the August inflation data for the UK and everybody was wildly celebrating that inflation collapsed all the way from 6.8 percent to 6.7 inflation including housing costs, which is a much more important number that nobody in the media ever talks about fell from 6.4 to 6.3 percent.

But if you look a few lines further down, you can see this very ugly thing right here because owner occupier housing costs have gone up from 4.5 to 4.8 percent. Owner occupy costs are a proxy for paying your mortgage and out of the total weight of 1 000 points for the whole of inflation, 64 points Go to paying rent and 160 go to mortgages throwing council tax and basic utilities and the cost of housing makes up about 30 percent of Cpih. That is the inflation that includes housing costs. So according to the Bank of England, Owner Occupy a housing costs are up from 4.5 to 4.8 percent and housing overall is up from 5.4 to 5.7 And it does make sense because remember that record-breaking rent increase is only sitting at 5.5 percent.

But you do know that the high interest rates mean that this is just the start of rental prices blowing up a heck of a lot higher, and the vast majority of mortgage holders are still on their old fixed terms that they got when the interest rates were 21 times lower than they are today. So when those mortgages begin coming off the one percent rate and switching to the six percent rates or the seven percent rates, I Did the maths: I will share the math as to exactly when that's going to happen in a minute. When that happens, the monthly mortgage payments are going to go up by 50 to 100 depending on your situation. and what do you think is going to happen to Cpih When mortgage payments increase from the a 4.8 percent year on year, there are now to something more like 50 in the Bank of England's date on Mortgages Buy to Let Mortgages The orange line on this chart have reduced by about 40 percent in the last year.

and I know a lot of people are going to celebrate wildly because everyone loves to hate the buy to let landlords. All those guys. they're buying up all the properties and they're screwing everybody. Over hating on the landlord is a bit of a national hobby, but think about what this data means.

If Buy to let landlords are not taking out new mortgages, it means they are either selling the properties or their mortgages are switching to very expensive standard rates. And what happens in either of those two situations? Well, when they sell the properties, it means that there are less rental properties on the market. so house prices will be dropping because of the extra properties flooding the market that have to be sold. But at the same time rent is going to increase.

It's already going up fast, but this is just the beginning. This is just the start. It will get worse. And if buy to let landlords do not sell their mortgage now costs 50 or 100 or whatever, it is more than it did before.

So what do you think is the landlord going to try and do in this situation? They are going to jack up rental prices as much as they possibly can get away with as soon as they possibly can get away with. And here is another very important chart. It shows the areas balance on mortgages, and if you are really good with charts, you might just be able to spot a pattern. here.

The pattern is that the numbers are going up a lot on the right. Balances outstanding were 16.9 billion pounds in Q2 2023 and one year ago there were 13.1 billion pounds. So the number of people who are behind on their mortgage payments has increased by 29 in the last year, and this is before the vast majority of mortgage holders start coming off their fixed low interest rates. In the inflation data, there is a chart that shows which factors contribute most to inflation and you can see the green bit in the middle is the housing and household Services bid and you can also see that in recent months it has been reducing after going completely nuts in 2022.

So you might say Sasha I Thought that you said housing costs are going to absolutely blow up and this chart says the opposite. It says that they are reducing well. Here is that green bit from the previous chart broken down into its components and you can see that the blue stuff is what caused it to blow up last year and that blue stuff is the cost of electricity and gas and the price of energy went absolutely crazy last year after Russian invaded Ukraine But the relative increases this year are a lot smaller. But ignore the blue bit and look at the purple and the lime green stuff underneath where the real problem sits.

The purple is the owner occupies cost and the lime green is red. Now energy is an important factor, but energy is dependent on commodity prices and agreed of energy companies, commodity prices fell right back down. So we are seeing in this artificial drop in overall inflation. But here is what the UK inflation looks like if you just take out the electricity and gas costs from the overall calculation.

I Went through the last two years and I removed it manually and you can see why anyone who actually looks at the data is really concerned about how sticky inflation is in the real world. Because this data is before mortgage payments and rent start exploding next year. at the moment, energy inflation has come back down and food inflation has dropped from sitting at 20 to just 13.6 percent. and the median government are celebrating like they actually want something.

So the government's plan all along was to wait out until the Ukraine war goes into a long enough stalemate so that the energy price inflation Falls right back down and then the government can congratulate themselves Pat themselves in the back and tell everyone they've done a really good job. So when will the mortgage collapse happen? Well, this is the chart of how much was given out in new mortgages over the last two years. I Went and found the source data and plotted these same numbers going back to 2016. you can see that there was this dip in mortgages being given even out when Covid first arrived, but then from Q4 2020 we had two years of much higher amounts being taken out in mortgage advances.

I Then found this article from the Financial Times from the middle of this period and according to the Financial Times calculations, based on nationwide market data, the average fixing period has gone from about 2.4 years to about 3.6 years over the past decade. So the average fixed term was about 3.6 years in the middle of this period. Now I Don't know what the distribution is, but here is a random guess. Based on 3.6 being the average and almost all mortgages being either two, three, four, or five year fixes, it's probably not going to be far off.

So I took the FCA data on monthly advances and I broke it into these two, three, four, and five year mortgages. I Then took the Bank of England base rate and stuck the average rate in each of those quarters down here. I extended the rate into the future so that the numbers can then multiply so that it all works as soon. assuming that the rate doesn't go up or down.

just get it flat because that's what the Bank of England is saying anyway. I Then worked out the rate shock for each mortgage duration. This is the difference between the Bank of England base rate when the fixed term ends and what that Bank of England base rate was when the mortgage was first taken out as a sort of proxy for how bad is going to be for the people when they come off their fixed terms. Then I offset the mortgages based on the fixed term duration so that the two-year fixes are offset by two years and the three years are offset by three years so that I know exactly when those mortgages end their fixed terms and you can see the chart of that data here.

It's not very interesting, but the people who are ending their fix in 2021 did not have any payment shock, whereas the people ending their fixed terms now and in the future definitely do have a payment shock. So I want to multiply the amount of mortgages coming out of their fixed terms by the relative payment shock of those mortgages. Now this is not perfect, but it gives you you a picture of how completely those mortgage payers are. And here is that chart.

and when I first saw this chart, my jaw hit the floor. You can see that in 2020 and in 2021 people coming off fixed rate mortgages were actually doing great because the interest rate was so low, it was lower than when they were taking out their mortgage on average. But here is Q3 2023 which is where we are right now and when people's fixed terms end. Even if they cannot afford to pay the new monthly payment, they can probably make it maybe two or three months or whatever before the really hits the fan.

And the UK government has said that you can now switch to an interest-only mortgage because that solves everything, but it actually makes a relatively little difference to your monthly payment. So we are right now sitting on the edge of a complete disaster. The data's there. I've brought the receipts.

This chart shows the relative number of people who are about to get completely wrecked by their mortgage payments. Between Q3 2020 3 and Q1 2025, we will be watching a complete Financial destruction of a whole generation of people who will not be able to afford to keep a roof over their heads. And this has only just started. Now we haven't seen the data on this from the government because this quarter hasn't even finished and it takes time for them to then tell either.

but we already know it's coming because we can do math. We can put a few numbers together. It's not exactly rocket science, but is anyone in the media talking about this? Is anyone covering this situation? No. Everyone is talking about how great the inflation date is and how the UK government has a plan and the plan is working.

The data says that UK government has no plan whatsoever. They are not fit to do their jobs and their actions. or should I say inactions will destroy millions of lives. But hey, enough about all that you know Sasha's just there spouting Doom and Gloom Let's celebrate that inflation drop from 6.4 to 6.3 percent.

Remember to go and get your four free shares with Weeble. Check that link in the description and I'll see you later.