Latte economics*
Immediately after the Bank of England raised mortgage rates, the media was dominated by the news, with headlines such as:
“Mortgage Warning for Millions”
“Mortgage Prisoners Trapped”
“Mortgage Storm Clouds”
As usual, the reality for many people is somewhat different than the scaremongers would have us believe.
According to the BBC News website last Friday, 24th March 2023:
“When interest rates rise, more than 1.4 million people on tracker and variable rate deals usually see an immediate increase in their monthly payments.
The increase in the Bank rate from 4% to 4.25% means those on a typical tracker mortgage will pay about £24 more a month. Those on standard variable rate mortgages face a £15 jump.
This comes on top of increases following the previous recent rate rises. Compared with pre-December 2021, average tracker mortgage customers will be paying about £394 more a month, and variable rate mortgage holders about £251 more.”
The average price of a latte from Starbucks is £3.50.
On this basis, a 0.25% rise in mortgage interest rates is equal to one latte a week.
Comparing current rates with pre-December 2021, it’s the equivalent of one latte a day each for a couple with a joint mortgage.
I’m not saying that giving up latte, or anything else of a similar cost, is ideal – I just wish the media would report things in perspective.
*For 20 years, Property Academy members have benefited each quarter from the wisdom of Roger Martin-Fagg, a renowned behavioural economist who has been broadly right for over two decades with his take on the economy and political landscape.
Given how much misinformation is circulating, we’ve decided to open up tomorrow’s live webinar with Roger to all our four-i readers too – you must register first here.
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