What caught my eye this week.
The surge in mortgage costs [1] as millions have rolled-off barely-there fixed-rate mortgages has been a bit of an anti-climax, hasn’t it?
Sure the resultant property market is far from perky. And life is certainly tougher if you’ve had a higher mortgage – or rent – bill to pay, on top of the rest of the cost-of-living crisis
But we’ve not seen a massive nominal house price crash. Let alone a wave of repossessions.
According to an ongoing deep dive [2] by This Is Money this week:
The Bank of England’s latest figures showed the value of outstanding mortgage balances with arrears increased by 9.2% in the three months to December 2023, compared to the previous three month period.
Arrears rose to £20.3 billion, which was 50.3% higher than a year earlier.
The proportion of mortgages that were in arrears increased to 1.23%, which UK Finance says is the highest proportion since the final three months of 2016.
These are leaps to be sure. But they sprang off a very low base.
Overall there are still only 107,000-odd mortgages in arrears. That’s roughly half as many as at the peak of the financial crisis [3].
Going nowhere
What’s the difference? High employment, I’d say. As long as people have their jobs, they’ll throw everything at their mortgage for as long as they can.
This Is Money cites evidence that savings are being depleted. Some of that may be going on mortgage payments, and that can obviously only go on for so long.
But equally it doesn’t really prove huge stress. Most people who have savings were probably running their budgets with some wriggle room in the first place.
Where I do see stress is in the buy-to-let market.
There’s not been a wave of selling there either, clearly. But I don’t see many people too enthusiastic about becoming new landlords today – and those that are keen are surely being swayed mostly by past performance figures.
Those earlier gains were achieved by a huge escalation in price-to-earnings ratios for property and a historic grind lower in rates. We might see a little of the latter, as rates dip over the next couple of years. But could multiples really go higher?
We’ll see, but right now the numbers don’t stack up [4] – not in London, anyway, despite a population boom [5].
The flat opposite for me has been looking for a tenant for months. The rent set by the hard-charging Foxtons agency is likely too optimistic. But I still can’t make the yield work for its owner, compared to other places they could invest the money.
Nevertheless with interest rates much more likely to fall than rise following the encouraging inflation figures this week, the UK property market has once again proved to be a mighty end-of-level boss.
People would have – and did – predict carnage in 2022 when rates began to rise.
But the price crash has been in real terms only. And money illusion dulls that pain.
Article errata
I hate having to do this, but unfortunately we published two mistakes this week. They were immediately updated on the web site. But I don’t want to spam anyone’s email inbox with corrected resends, so this will have to do.
By far the most important is that bond funds pay income gross – that is, with no tax deducted.
With my co-blogger The Accumulator away, I took over updating duties for his bond tax article. And I totally missed a change in the legislation some years ago.
On the one hand, this is why we revisit old articles and try to keep them up-to-date. That original article was written in 2015. This tax change alone proves it was long overdue a makeover.
On the other hand, look what happens when the stock-picking guy is let loose near fund stuff. Please lobby The Accumulator to get his priorities’ straight!
At least the second error has his fingerprints on it. Because no, Japan hasn’t posted superior equity returns to the US over the past over however many years. Not even in real terms and after its recent rally.
I suppose @TA was writing under the influence when he let this gremlin through. But I should have spotted it myself, so mea culpa.
We consider getting nerdy investing stuff right a USP of Monevator. Apologies from us both.
Have a great weekend!
From Monevator
The contrasting fortunes of Britain’s European stock market rivals – Monevator [6]
How bonds and bond funds are taxed – Monevator [7]
From the archive-ator: My law of crazy big numbers – Monevator [8]
News
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Bank of England base rate remains at 5.25% – Which [9]
March’s 1.5% rise in house prices largest in 10 months, says Rightmove… – Housing Today [10]
…while rents are up on average 29% on pre-pandemic levels – This Is Money [11]
How a Chinese takeaway worker led police to ill-gotten Bitcoin worth £3bn – Sky [12]
Government wants flying taxis to take off in two years… – BBC [13]
…even as the UK’s EV sector is rapidly unravelling – Evening Standard [14]
An Anglo-Italian company says it has cracked bitcoin [Search result] – FT [15]
[16]
Over 300 years of central bank interest rates – via Econbrowser [17]
Products and services
First-time buyers: how to pick a mortgage and the best deals – Guardian [18]
Isas: the nation’s tax-free favourite turns 25 [Search result] – FT [19]
Home insurance costs surge 40% in a year – Which [20]
Open an ISA account with low-cost platform InvestEngine [21] and get up to £2,500 as a cash bonus (Affiliate link, T&Cs apply. Capital at risk) – InvestEngine [21]
Uber-style pricing is coming for everything – Vox [22]
The mutual fund at 100: is it becoming obsolete? [Search result] – FT [23]
The top five best cash ISAs – This Is Money [24]
Santander’s new £185 bank account switching offer – Which [25]
RobinHood launches for UK customers – CityAM [26]
Is Uber One worth the money? – Be Clever With Your Cash [27]
Dream homes for first-time buyers, in pictures – Guardian [28]
Comment and opinion
The man who knew too much – Morningstar [29]
Four methods of reducing Sequence of Returns Risk – White Coat Investor [30]
Why don’t we do what we want? – Young Money [31]
Thinking anew – Humble Dollar [32]
Is it best to keep a Junior ISA secret until your child turns 18? – This Is Money [33]
Forged in the FIRE – Money with Katie [34]
What should we do given we’re so bad at forecasting? – Behavioural Investment [35]
Index providers are massively dull — and massively profitable [Search result] – FT [36]
The best way to get things done – Of Dollars and Data [37]
Proof of life – Indeedably [38]
How to live a regret-free retirement [Podcast] – Humans vs Retirement [39]
Global tracker worries mini-special
The pitfalls of a global tracker – Trustnet [40]
Sticking with a passive Isa strategy [Search result] – FT [41]
Why are US stocks so expensive? – The Irrelevant Investor [42]
Naughty corner: Active antics
The cadence of alpha – Capital Gains [43]
A deep dive into Renaissance Technologies [Podcast] – Acquired [44]
Reddit pops 47% in a day on highly-anticipated IPO – CNBC [45]
Thinking in probabilities – Systematic Individual Investor [46]
Thoughts on diversification – Base Hit Investing [47]
Landlord mini-special
Most landlords to pay more capital gains tax when selling despite Budget – This Is Money [48]
The end of landlords: a simple solution to the UK’s housing crisis – Guardian [49]
Kindle book bargains
The Success Myth by Emma Gannon – £0.99 on Kindle [50]
Eat Shop Save by Dale Pinnock – £0.99 on Kindle [51]
Lean In by Sheryl Sandberg – £0.99 on Kindle [52]
The Making of a Billionaire by John Caudwell – £0.99 on Kindle [53]
Environmental factors
England won’t adopt EU river pollution rules for pharma and cosmetics firms – Guardian [54]
Anthropocene unit of geological time rejected – BBC [55]
Persistent drought is drying out Chile’s drinking water – Reuters [56]
How much have temperatures increased across the world? – Our World in Data [57]
Weather presenter Sabrina Lee quits buying new clothes – BBC [58]
How long should a species stay on life support? – The Atlantic [59] [h/t Abnormal Returns [60]]
Robot overlord roundup
Google’s DeepMind unveils AI assistant for football tactics – DeepMind [61]
Chinese and western scientists identify ‘red lines’ on AI risks’ [Search result] – FT [62]
Off our beat
Lane’s gambit – Slate [63]
The London office where pendulums keep cyber threats at bay – Ian Visits [64]
Brexit’s lasting damage is looking inescapable – Bloomberg [65]
The couple’s guide to moving in together – Vox [66]
When London’s Trocadero was the centre of the video game universe – Guardian [67]
Don’t be the best. Be the only – Kottke [68]
Daily habits from the Blue Zones for a long and healthy life – CNBC [69]
The 89-year old woman traveling the world solo – BBC [70]
And finally…
“Why is it always so hard to get started?”
– Phil Knight, Shoe Dog [71]
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