Something better change
Low interest rates have created something akin to Alice in Wonderland or, as Andy Haldane at the Bank of England would have it, they have provided temporary relief for a Debt Hangover. What happens when the medicine runs out? Haldane says if long term interest rates reverted to a more normal 5% then UK households debt servicing costs would almost double relative to income bringing them to levels last seen in the 1990s recession. Hardly a recipe for a booming housing market you may think. More controversially, Haldane observes some economists arguing for mortgages to be designed to avoid the repeat of a credit-fuelled boom and bust. Instead of being fixed in money terms the size of the mortgage would vary with house prices. Tying repayments to the loan to value ratio would mean when prices go up in a boom the repayments do likewise thus damping down speculation. Conversely when prices fall in a recession lower repayments help people when they are most cash strapped. An extreme step but the fact it’s been considered suggests the Regulators feel that something has to change. Will the political classes turn a blind eye though? Who knows, but if you’re thinking of selling can you afford to wait and see?
Compliance Officer for Legal Practice
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