Help for Mortgage holders

WHY NOT INTEREST ONLY MORTGAGES

SOLUTION 

• 3-5yr suspension of mortgage capital repayments 
• Instead – Monthly repayments based on interest only

A mortgagee will pay less each month by having a mortgage repayment scheme based on interest only

£200,000 mortgage contract would pay £500 pm  – £600 pm less

£400,000 mortgage contract would pay £1,000 pm – £1,300 pm less

Introduction

The Bank of England are increasing their rate of interest and predicting higher rates to follow. This will, in most cases, have more of an economic impact on households than the energy crisis. Not just for homeowners and those renting their dwellings but also commercial and retail buildings. Therefore added costs passed on to the consumer resulting in financial hardship.

Reports over the last  weeks indicate hundreds of mortgage plans were shut down and whereas a mortgage offer was made at the beginning of the week it was subsequently withdrawn and then offered again with an increased interest rate. Some might say this was pure opportunistic financing for profit – especially when the proposal was on a remortgage plan. The mortgagee will already have been vetted. Should we accept that there is risk when the remortgage takes place.

Financial Institutions Bailed out in 2008/9

Remember the financial institutions were bailed out in 2008/9 and they seem to have forgotten that every tax payer had to make some sacrifices to carry out that bailout. Urgent discussion needs to be had with the (financial services) mortgage industry. Should they not accept they can assist mortgagee’s.

Should we bail out Mortgagees and Renters

Now is  the time for some creative action to bail out mortgage holders together with creating incentives for those seeking a mortgage for the first time.

Perhaps during the coming weeks interest rates may become more stable but we cannot rely on that as it  is hard to see with inflation rising on a global basis brought about by the war in Ukraine. We are not in uncharted waters as we have seen interest rates rise before and world oil prices increase but we seem to have forgotten what happened. Petrol rationing in the 1950’s and 70’s, high unemployment, high interest rates, the 70’s three day working week and electricity cuts. We coped with these developments.

We cannot be over optimistic that interest rates will reduce in the medium term and therefore the mortgage issue has to be addressed. The markets also have to adjust to protect individuals economic stability 

The impact of higher interest rates on those holding a mortgage means an increased monthly expenditure. Those renting (houses, commercial and retail) will also find their monthly rents going up..

Interest rates have been much higher decades ago  and we have to learn from those experiences.

We need to further assist the house owners dream to own their property. To do that the financial services sector has to adjust. In 2008/9 the financial crisis was mainly brought about because lenders were offering extended loans beyond the actual value of the property. Once the bubble broke everything started to tumble. We obviously do not want to replicate that situation. Nor do we want to see the housing market crash with potential negative equity due to forced property sales because owners cannot meet mortgage repayments.

The High Street lender who offers the mortgage does not hold that debt. They offset their risk in the markets to other (often anonymous) financial institutions – this is the securitisation process. So taking out a mortgage with a high street bank does not mean only one main lender is involved. The risk is spread.

When an application is made for a mortgage the form asks (in most cases) whether the repayment programme will be with “capital repayment” or “interest only”. Most interest only mortgages are not offered. This needs to change

(Various schemes could be initiated to cover the needs of individual mortgage holders hence the suggestion of a 3-5 years process. Some mortgagees could have a longer period dependent on individuals economic circumstances and credit rating. There could be variation in interest rates to meet financial circumstances but the overall affect would be an immediate and considerable reduction in monthly repayments).

This would be neutral free to the exchequer.

Past Mortgage Policy

Those old enough will remember the fiscal incentives which provided a homeowner tax relief – mortgage interest relief (MIR) and the Mortgage Interest Relief At Source (MIRAS) both were withdrawn from April 2000 under the Labour government Chancellor Gordon Brown (it was said the schemes only benefited the well off). 

Prior to 2000 a mortgagee could attract the MIRAS scheme and could also benefit from an interest only mortgage. It meant a tax advantage on the interest charged but also provided  a reduced monthly repayment programme based on interest only. Many, including myself, received that incentive and I was not well off.

We keep hearing that the older generations were able to buy and sell houses, increase their equity stake in their property. Well this was one way to afford such overall house investment.

The downside of interest only repayment plans is that the capital sum does not decrease (nor does it increase) but it should be repaid at the end of the mortgage contract. This could be offset by various options to pay off the residue debt, all economically managed. Also the mortgagee could continue to pay the interest on the mortgage. These proposals created help to a house owning society.

Of course capital loans taken out at that time were far less than today but as a percentage to the value of the mortgagees property perhaps on average the same.

Mortgage lenders are cautious in their lending policies, especially following the 2008/9 financial crisis. They scrutinise applications in a more rigorous managed fashion, mainly on a box ticking process. Nothing suggested in this paper takes away that scrutiny process (or loan refusal) nor the choice of the mortgagee to have a capital or interest only repayment programme. That choice does not appear to be on offer.

I have heard that mortgage lenders will only consider an interest only mortgage if the borrower has an income over £100k and an absolute clean credit rating. All this needs to be questioned and a more equitable plan would be the relationship between the amount borrowed and their actual salary and disposable income.

We know that many young people cannot get on the house ownership ladder but think why is this compared with the way in which their parents or grandparents managed their mortgages repayment.

Those wanting to own their own home should be encouraged to take out a mortgage and by having tax and repayment incentives they can maintain / improve their living standards. That process helping the cost of living affecting everybody at this time. Levelling up in certain areas would benefit.

If the homeowner has extra monthly funds they are likely to spend more – helping local and national retailers

The funds spin around in our society in order for economic prosperity to create growth in an area.

Those Renting

Let us divert to those renting who have to continue to pay their rent during times of financial hardship and even after retirement. They up/down size as their situation changes. As do homeowners. Incentive to buy as against rent must be a reasonable aspiration but it is their choice which option will benefit them, rent or buy. 

Renting, as mentioned above, continues after retirement and can present serious financial hardship. As rents increase this will become a worse situation which may have an impact on state intervention in the form of housing benefits. The inability to get off the renting option and it’s future impact on state finances must not be easily dismissed.

Interest only mortgages impact on Lenders

Let us look at the financial impact on mortgage lenders and the securitisation markets.

The banks are already lending capital sums on house purchases. Through the securitisation process mortgage lenders offset their potential risk to other financial and investment operators. Mortgage profit comes from interest charged on lending so no loss of profit for the financial services sector under the interest only  proposal. In fact even a larger profit as more buy their own house and if interest rates remain high.

I accept that monthly capital repayment compounded provides funding for the next generation of borrowers but taking into account the securitisation process and that an ever continued access to capital repayment at the maturity of the plan this can be managed. 

Financial institutions can borrow from the BoE at a much reduced interest rate.

For the record it should be noted that other schemes do exist where interest only is operating so it is nothing new. The schemes for “buy to rent”, “shared ownership”, “first time buyers” and other contracts all with an element which involves interest only repayments at certain levels of purchase (and income).

An interest only scheme would be no cost to the government exchequer as the whole process initiated in the private financial sector. Specialised lending rules and powers could be initiated that would guarantee economic control, and regulation to maintain consumers protection

Further articles on :-

1. Building more houses (at all levels) as part of the growth package. Past experience shows more houses built creates a growth climate
2. Encouraging the self and custom builders (resulting in more locally built houses by SME builders)  
3. The “new” Investment Zones” to encourage house building, employment (new jobs), bringing investment into these Zones to improve living and leisure conditions, and attracting tax incentives, cutting out onerous building conditions on (houses, commercial and retail building) which results in costly time consuming delays

WILFRED ASPINALL

Doddingselles, Pirton, Hertfordshire, SG5 3FR

Tel: +447872953922    Email:  wilfredaspinall@me.com

wilfredaspinallblog.Wordpress.com

The rate of interest rise for mortgages needs to be seriously examined. Remember the financial institutions were bailed out in 2008/9 and recovered. 

Now is  the time for a bail out for mortgage holders.

SOLUTION –  a 3-5yr suspension of capital repayments and monthly repayments based only of interest.

(Various schemes could be initiated to cover the needs of individual mortgage holders hence the suggestion of a 3-5 years process. There could be variation in interest rates to meet financial circumstances but the overall affect would be an immediate and considerable reduction in monthly repayments).

This would be neutral free to the exchequer 

Those old enough will remember the MIRAS scheme which provided a fiscal incentive to homeowners to borrow with certain tax relief. 

Under the provisions of FA1999, mortgage interest relief (MIR) and the Mortgage Interest Relief At Source (MIRAS) scheme were withdrawn from 6 April 2000. (Relief for new loans to an elderly person to purchase a life annuity (normally referred to as home income plans) was withdrawn from 9 March 1999).

This was abolished under the Labour government Brown economic strategy (only benefits the well off). 

Today we should be encouraging homeownership and making it possible to ease mortgage applications and how they are financed. The Chancellor has said we are entering a new era and this approach could benefit a lot of people. Nothing so far from government about how mortgages and interest rates are to be managed.

Those wanting to own their own home should be encouraged to take out a mortgage and by having an interest only mortgage scheme they would be given the incentive to use that saving to improve their living standards. That process helping the cost of living affecting everybody.

Those renting have to continue to pay their rent during times of financial hardship and even after retirement. They up/down size as their situation changes. As do homeowners, Incentive to buy as against rent must benefit them. The financial situation can be managed by interest only mortgages

The banks are already lending capital sums on house purchases. Through the securitisation process mortgage lenders offset their potential risk to many other financial and investment operators. Their profit comes from interest charged on lending so no loss of profit for the financial services sector under this proposal.

No cost to the government exchequer as the whole process initiated in the private sector. Specialised lending rules and powers could however be initiated that would guarantee some economic control.

Coupled with all the above a reform of the planning regime and building more houses creates jobs, not just for builders but other trades too. That in turn allows more funds to circulate in the economy making an area more prosperous and economic growth emerges.

Those wanting to purchase a house would have more choice in the way they live and assist their economic position. It would additionally aid the levelling up strategy throughout the U.K. 

All the above could be created quickly following a detailed urgent study.

Happy to provide more information.

WILFRED ASPINALL

Doddingselles, Pirton, Hertfordshire, SG5 3FR

Tel: +447872953922    Email:  wilfredaspinall@me.com

In relation to the previous article on the NI Protocol the government have published detailed guidance to respect the CE marking (EU conformity marking on products) and with effect from 1 January 2023 respecting the UKCA conformity marking for all products being marketed in the UK 

New legislation introduced last week will rightly change the requirements for goods coming from the UK into Northern Ireland respecting the basis that Northern Ireland is a part of the UK. 

Confirming the requirements of the UK Internal Market

UNTIL that legislation is enacted (or there is an acceptable negotiated resolution between the UK and the EU) the current standards set by the EU will apply in Northern Ireland

It is hoped that in order to clarify / confirm that Northern Ireland is a part of the United Kingdom this new legislation is pushed through the HoC and HoL as quickly as possible. This will stabilise the constitutional arrangements in Northern Ireland

Placing manufactured goods on the market in Northern Ireland

https://www.gov.uk/guidance/placing-manufactured-goods-on-the-market-in-northern-ireland

What is not covered is goods imported from the EU members states (and from third countries) through the Republic of Ireland and into Northern Ireland. Will these goods be covered by any CE mark or – in preference – by the UKCA mark with effect from 1 January 2023. At the same time covered by “Green” and “Red” lanes when passing over the border between the Republic of Ireland and Northern Ireland

IN ADDITION

Guidance is set out how after 1 January 2023 products to be marketed in the UK will need to have the UKCA mark on them. (The CE Mark can still apply if they are already on the the market shelves)

Guidance is also set out confirming that exports to the EU member states will continue to require the CE mark – on the insistence of the EU Commission – in order for them to be marketed

As mentioned in the previous article construction products – which took the EU Institutions 6 years to review – involves a multitude of individual products. With effect from 1 January 2023 the UKCA marking will apply.

Using the UKCA marking

https://www.gov.uk/guidance/using-the-ukca-marking

Construction Products Legislation – using the UKCA marking

https://www.gov.uk/guidance/construction-products-regulation-in-great-britain

It is essential that the UK government does not allow a role for the European Court of Justice in any activity between the UK and Northern Ireland. The NI Protocol should follow the same procedure for trade as that that applies between any part of the United Kingdom when exporting / importing internally

The Comments by a number of commentators including some in media articles demonstrate their leanings against BREXIT. The Conservative Party membership, in my opinion, are wholeheartedly in favour of the governments strategy towards Brexit – as indeed are the electorate judged by the result of the 2019 General Election. (Not to mention the 2016 Referendum)

Yet when do we see a complete commitment from the media setting out the governments strategic papers and commenting on them in support of establishing the UK as an independent sovereign state. We have left the EU –  now we want to see the relationship with the EU concluded by a non tariff, mutual recognition Free Trade Agreement – not under the control of EU legislation or EU Institutions nor the European Court of Justice.

We don’t need an extension beyond 31 DECEMBER 2020

As an aside can you imagine the EU member states that pump commodities and services into the UK finding tariff’s imposed under WTO rules making them more expensive and  trade and services falling away putting business, economy, jobs and their future at risk.

We should read the government statements on their negotiating stance. Well for the record here they are.

The UK’s approach to negotiations with the European Union.

https://www.gov.uk/government/publications/our-approach-to-the-future-relationship-with-the-eu

Don’t forget that the UK will wish to establish FTA’s with Third Countries and in order to do that we must be free of any EU hindrance

We need to have more constructive articles by people who have the experience of involvement with the EU Institutions for which the “Bring Back Control” slogan promoted by Dominic Cummings demonstrated the will of the majority of the people in the UK

HAPPY READING

PETITION

BRING IN RATIONING

Oh Dear what can the matter be

Well we all know what it is and we are ALL in the same boat

Panic buying has to stop and some reasonable order must return to buying groceries and general goods. 

The current commitment by Supermarkets is real that their supply chain remains in good order. It  is a fact which we have to believe but this will be negated unless some order is brought about. Looking at the TV we see empty shelves this does not need to be happening

Think about those who are self isolating being actually sick but especially those over 70 and those with underlying health issues and pregnant women. Asking them, or a friend, to join a queue to buy only what they need when others are panic buying is unacceptable. In turn if  everybody seems to be stockpiling the supermarkets will not be able to honour their commitment.

Nobody wants regulation on what and when we can do anything in this country but under the situation we find ourselves in buying food and general goods it does need to be managed and  sadly it also seems it needs to be regulated

Only those in the 70’s age group will remember Rationing after the war. It lasted from 1946 – 1954. It was not degrading our democratic rights and liberty it was simply a process to manage our food and general goods chain of supply to make sure everybody had what they needed. Everybody cooperated

In the current situation, where people don’t seem to be able to manage their “normal” shopping habits and are in effect panic buying something needs to be done.

Limiting customers to only two of any product without monitoring where they shop will only tempt them to go to many stores to stock up for what they think is to come.

We must understand that for those in self isolation and those shopping for them then standing in a queue for any length of time negates the distancing and isolation objective

Sadly if we are going to get through the next few months there needs to be a regulated process.

Rationing May be the only answer

Incidentally – Shopping online means currently waiting for 2-3 weeks for a delivery.

 

FUTURE RELATIONSHIP BETWEEN THE UK AND THE EU

What follows is the differing stances of the UK Government and the EU on their strategy in the negotiations for the Future Relationship between the UK and the EU

The government are right that the UK is a sovereign nation and must be able to issue its own legislation, control standards for goods and services and enter into FTA’s with Third countries.

It is essential that the UK is not within the jurisdiction of the European Court of Justice

This suggestion about a “level playing field” has come up time and time again during debates on the harmonisation of standards indicating how concerned the the EU is over competition (and a fair deal).

Experience tells us that the UK has always promoted high standards, monitored and enforced those standards.

 

 

HS2 GOING AHEAD

The announcement by the Prime Minister Boris Johnson is absolutely fantastic news.

It will demonstrate that we are determined to present a Global Great Britain to access all parts of the UK

Appendix D was published in the response to the Dominic Cummings

IT ISFANTASTIC NEWS

 

APPENDIX D

HS2 – A National Asset

Once upon a time I worked in Manchester (and lived in Macclesfield Cheshire). I would commute from Macclesfield to London perhaps once per week. The train service was good and I was able to be in the London Office for a meeting by 10am

On moving to London I would commute by car, as I had parking facilities. When I went by train I was invariably late. I spent a considerable amount of time in the HoC. Times have changed for the London commuter

On going to Brussels as a Member of the European Economic and Social Committee the only way I could get into my London office and then commute to Brussels. Was travel by car to a London airport and then to fly.

But then Eurostar came along and the 5 hour journey became a tolerable experience leaving from Waterloo

However once Eurostar became “high speed” and departing from St Pancras the journey, even on a daily commute, became a pleasure.

The point is that

• Throughout the above it was possible to work uninterrupted. WiFi access became available
• Able to read legislation which I was following
• Relax in modest comfort

Eurostar is a high speed venture (HS1) and has become a national asset. (OK half owned by the French).

As we move to a more global outlook, aimed at creating a more prosperous UK and attracting inward investment, not just for the area around London, but joining up the four  nations of the UK mainland (Northern Ireland needs a different infrastructure programme) we need to demonstrate not just to our own population but also to those wishing to invest and visit the UK that we have a programme for efficient, speedy and cost effective rail and air transport.

The HS2 project appears to have stalled in some ways and I might conclude that there have been those who from the start have not been in favour of the high speed idea.

HS2 and the continuation of the line to Manchester and Leeds – then eventually to Liverpool and into Scotland. In addition eventually a high speed modern service East to West and into North Wales and a future project into the South West of England, East Anglia and South Wales.

We need to accept that our current rail infrastructure is at full capacity for rail passengers and cargo transport too

In addition that conventional local rail services can be joined up with high speed destinations and must evolve at the same time

Such ventures will demonstrate to the global community that the UK is open for business. Our transport services need to be well developed

By uncertainty and delay the budget will by default keep going up. We should move ahead but in a determined way to (sorry about this) – “GET HIGH SPEED RAIL DONE”

Those who are not enthusiastic about HS2 need to take into account the perception of a high speed asset in a modern Global United Kingdom. (Remember that EU member states like Germany, France and Italy already have high speed rail and they will be competitive towards the inward investment we are hoping to get.

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