We had a golden opportunity to make lending affordable for all when rates were at 0.1% p.a. Let’s do that now with the people's bank.
Commercial banks have proved ineffective at delivering mortgages at affordable prices to the population. After the financial crisis of 2008 central banks had to reduce the cost of borrowing (interest rates) to near zero. What a golden opportunity that was to reset lending to make it affordable for all. It never happened of course, it wouldn’t benefit the banks bottom line and the government was too busy penalising the poor, sick, disabled and the young with austerity to think of helping people.
But what could have been done then can still be done now. The people’s bank is a wholly state owned vehicle to deliver 80 year interest only mortgages to the people. Property appreciation over the 80 years will pay off the capital at the end of the mortgage. And we’ll charge the very low interest rate that was available during the financial crisis, 0.1% p a., or £84 a month for a £1 million mortgage.
The people’s bank – For people, not profit
Everyone 18 years and older will be offered an 80 year interest only mortgage at a rate of 0.1% p.a. for a single property they would live in. However, no one who currently has, or has previously held, a mortgage anywhere in the world will be eligible, save a limited ability to transfer from a current mortgage to this one.
If you have, or have ever had, a mortgage, there is a presumption you have already benefitted from rising house prices. This will make you ineligible for the 80 year mortgage.
People buying second homes will need to continue to source a mortgage from a commercial bank.
It’s estimated the UK spends around £15bn a year subsidising private landlords via housing support. This is a much cheaper option, it costs next to nothing, and most importantly sees public funds directed at the people that would benefit the most, rather than the already wealthy. Moving residential property mortgages into this bank also protects them from the larger, more volatile, and riskier financial markets. When the next financial crisis happens, we can let the ‘too big to fail’ banks fail as they should have in 2008. Capitalism has the word bankruptcy for a reason, let start using it again.
