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I get that inflation needed to be reeled in, but these higher interest rates seem to really be hurting the lowest income households. Come to think of it, just

by tnel77 3y ago

I get that inflation needed to be reeled in, but these higher interest rates seem to really be hurting the lowest income households. Come to think of it, just about everything seems to hurt the lowest income households. It’s truly a damned if you do, damned if you don’t scenario.

FartyMcFarter 3y ago
> Come to think of it, just about everything seems to hurt the lowest income households Not really. In most European countries including the UK, tax rates are lower and social benefits are higher for those households. Even VAT has lower rates for essential items like food (which comprise a higher percentage of expenses for those households compared to higher income ones).
deleted 3y ago
[deleted]
Workaccount2 3y ago
The buck is always passed until it hits someone that has no one to pass it to.
bb123 3y ago
Is that true? It seems to be hurting the households with huge mortgages most directly.
- nly 3y ago
  The pain is more to do with debt to income ratio than absolute debt In general poorer people tend to have more trouble servicing debt
  - bb123 3y ago
    What variable rate debt do poor people usually have? You have to be of a certain income level to even get a mortgage in the first place.
    - cudgy 3y ago
      Lose your job and you are instantly poor with an accompanying mortgage payment as if you weren’t.
      - bb123 3y ago
        Who said anything about losing jobs here? Joblessness is exceedingly low.
- onlyrealcuzzo 3y ago
  No. Inflation is great for mortgage holders. If ~40% of inflation is rent, it's hard for inflation to be 100% (for example) and rent inflation be 0%. It's possible, but very unlikely. If you bought an $8M house in Tahoe you can't afford, it would be outstanding if inflation went up to 80 billion percent, because then you'd basically get the house for free (as every dollar last year would be worth $800M this year, buying your house for the equivalent of a penny in this inflated currency). The only thing bad for mortgage holders is home price deflation - which usually doesn't happen when there is high inflation for the above stated reason.
  - notahacker 3y ago
    Inflation measures consumer prices, not the prices of assets like housing The response to inflation is interest rate rises, which increases the monthly mortgage repayments and total future outlay of mortgage buyers who dont have long term fixed rates (as of course do other rises in costs of living). And of course, this ultimately has a negative impact on the value of the house (although generally quite a modest one, especially somewhere like the UK with a shortage of homes)
    - onlyrealcuzzo 3y ago
      No. ~35% of the inflation basket in the US is owner's equivalent rent - which is an indirect way of measuring rent: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... In Canada it's ~41%.
      - notahacker 3y ago
        If you read your own link, it explains that the entire point of estimating owner' equivalent rent is to avoid counting capital appreciation of housing in the CPI, because house prices are not consumption (and also because actual expenditure on mortgages would be particularly unhelpful to include in an inflation index because it's directly correlated with the policy variable central banks use to reduce inflation) In the UK, the subject of the OP, measured inflation is around 8% and house prices (which rose consistently above inflation for the last couple of decades) are falling. Falling house prices are not good for homeowners.
wonderwonder 3y ago
Its very expensive to be poor

by tnel77 3y ago

FartyMcFarter 3y ago

> Come to think of it, just about everything seems to hurt the lowest income households Not really. In most European countries including the UK, tax rates are lower and social benefits are higher for those households. Even VAT has lower rates for essential items like food (which comprise a higher percentage of expenses for those households compared to higher income ones).

deleted 3y ago

[deleted]

Workaccount2 3y ago

The buck is always passed until it hits someone that has no one to pass it to.

bb123 3y ago

Is that true? It seems to be hurting the households with huge mortgages most directly.

nly 3y ago
The pain is more to do with debt to income ratio than absolute debt In general poorer people tend to have more trouble servicing debt
- bb123 3y ago
  What variable rate debt do poor people usually have? You have to be of a certain income level to even get a mortgage in the first place.
  - cudgy 3y ago
    Lose your job and you are instantly poor with an accompanying mortgage payment as if you weren’t.
    - bb123 3y ago
      Who said anything about losing jobs here? Joblessness is exceedingly low.
onlyrealcuzzo 3y ago
No. Inflation is great for mortgage holders. If ~40% of inflation is rent, it's hard for inflation to be 100% (for example) and rent inflation be 0%. It's possible, but very unlikely. If you bought an $8M house in Tahoe you can't afford, it would be outstanding if inflation went up to 80 billion percent, because then you'd basically get the house for free (as every dollar last year would be worth $800M this year, buying your house for the equivalent of a penny in this inflated currency). The only thing bad for mortgage holders is home price deflation - which usually doesn't happen when there is high inflation for the above stated reason.
- notahacker 3y ago
  Inflation measures consumer prices, not the prices of assets like housing The response to inflation is interest rate rises, which increases the monthly mortgage repayments and total future outlay of mortgage buyers who dont have long term fixed rates (as of course do other rises in costs of living). And of course, this ultimately has a negative impact on the value of the house (although generally quite a modest one, especially somewhere like the UK with a shortage of homes)
  - onlyrealcuzzo 3y ago
    No. ~35% of the inflation basket in the US is owner's equivalent rent - which is an indirect way of measuring rent: https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-and-rent.htm https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an... In Canada it's ~41%.
    - notahacker 3y ago
      If you read your own link, it explains that the entire point of estimating owner' equivalent rent is to avoid counting capital appreciation of housing in the CPI, because house prices are not consumption (and also because actual expenditure on mortgages would be particularly unhelpful to include in an inflation index because it's directly correlated with the policy variable central banks use to reduce inflation) In the UK, the subject of the OP, measured inflation is around 8% and house prices (which rose consistently above inflation for the last couple of decades) are falling. Falling house prices are not good for homeowners.

wonderwonder 3y ago

Its very expensive to be poor