Yawn – another rather pointless (and toothless) attack on the Tories.

Long term fixed rate mortgages certainly have the advantage of certainty – combined with the ability to refinance should long term rates subsequently fall.

However, these benefits are not costless, are they?
Indeed the costs to borrowers are likely to be quite high.
Long term interest rates will, on average, be higher than short term rates: the so-called term premium.
Lenders/investors in such mortgages will also demand a further premium to compensate them for any prepayment risk.

Of course, borrowers would have to pay for the greater security in long-term loans – that’s a trivial fact about markets generally. The point is, at the moment they don’t get the choice to buy this security (or not). That’s a market failing.

“In short, Cameron could show signs of having read the Miles Review.”

Could you remind us what Brown has done in the nearly four years since that review?

My understanding is that the majority of new mortgages (over 70%) are now fixed rate.

mike

that is indeed true, and particularly so of first time buyers who with little equity rightly weigh up that higher payments is a small price to pay for reduced risk further down the line.

But fixed for how long?
Not for the 20+ years common in the US mortgage market.
Nowhere near.
That’s the question the Miles review addressed, amongst others.

chrisc

to be fair five to ten years has become quite common now.

You can already get 10 year fixed deals (have a look on money supermarket or similar) but obviously the longer the term the greater the risk transfer and the more conservative the banks will be in pricing that risk. Short of hedging through property price derivatives I don’t see how anyone can shield borrowers from it. Buying a house is neither compulsory nor necessary, so perhaps we should be returning to the pre Thatcher situation where only the genuine middle classes expected to own property.

Is there even scope for fixed term deals longer then 10 years given the recent news that lenders are giving more money than borrowers can afford to repay? http://news.bbc.co.uk/1/hi/business/7138786.stm

Yawn – another rather pointless (and toothless) attack on the Tories.

I’m sorry Chrisc, you must be mistaking us for conservativehome. Try a better response next time.

Just thought this site was about being *constructive* and *not* party political, as your very earnest comments policy demands!

Interesting that Chris D has not also posted this on his own blog.
Not quite up to his usual – admittedly very high – standards?

Just thought this site was about being *constructive* and *not* party political, as your very earnest comments policy demands!

Well, seeing as you bring that point up everytime we have a go at the right, let me dispel a few myths you may have. This site is not explicitly party political in the sense that (as a whole) we don’t start from the viewpoint that a particular party should be supported. But that is no reason why the stupidity of any particular party or individual cannot be pointed out. Your criticisms make no sense.

Chris points out why he thinks Cameron hasn’t thought it through. It’s not an ad hominem is it? Either engage with the point or go to a site where you won’t find criticism of your idols.

chrisc

surely a site can be non-party political while still being political?

And since this site is non-party political but dedicatedly left wing in its politics, why would you think Cameron’s vapid notion of the inherrant goodness of the wealthy is contructiuve to us?

I think the main point, about a certain failure in the UK mortgage market, is a good one.

Though why make that via an attack on (easy target) Cameron (who is not one of my idols – if I have any – but rather vapid and in this instance just mouthing platitudes)?

And whatever happen to the Miles review?
Did the man who commissioned it actually read it?!

Sorry if I am making no sense!

Though why make that via an attack on (easy target) Cameron

Hold on? We shouldn’t criticise the Tories because Cameron is an easy target? What should we be doing? Criticising the vast left-wing conspiracy that pervades Britain? 🙂

chrisc

The Miles Review (March 2004)

The recommendations include:

that lenders make their full range of mortgage products available to all borrowers.
that mortgage advisors help people assess risk by presenting “what if” scenarios, giving an indication of the scale of variability in interest rates.
that lenders include, with Annual Statements, a leaflet setting out the current mortgage rates on all their products.
that if products are offered which give interest rate protection for mortgage borrowers the Government treat these as insurance for tax purposes.
that Government consider lowering the funding limit by members from the current 50 per cent. 25 or 30 per cent of building societies’ funds from members would still represent a substantial source of funding.
that covered bonds issued by UK lenders are treated in the same way for regulatory purposes as those issued in countries where specific legislation governing issuance has been necessary.

you’ll note that the Miles Review flagged the way for the Northern Rock debacle by suggesting a cut in members funds for building societies.

Well definitely the latter, inasmuch as it is not a *liberal* conspiracy!

Well definitely the latter, inasmuch as it is not a *liberal* conspiracy!

And no doubt you’ll keep repeating that ad infinitum.

Probably!