A left-wing academic is suggesting that the new UK Labour government should emulate the US and introduce life-long fixed-rate mortgages.
Some 90 years ago then-US President Franklin Roosevelt created the Federal Housing Administration sought to boost home ownership and encouraged lenders to fix interest rates for the duration of the loans, typically 25 or 30 years. These long-term fixed-rate loans were often guaranteed by the government as part of the ‘New Deal’ and so created a culture of competitive long-term loans without variable interest rates.
Now the UK academic Richard Murphy – on his Tax Research website – argues that something similar should be created here, by the new Starmer government.
He criticises the Bank of England for making home owners on variable rates mortgages “pawns in the game of supposedly controlling inflation” through interest rate rises.
He disputes whether rate changes are effective in that attempt to control inflation, and asjs: “Why is it that in the UK we don’t have what is available in the USA, which is a mortgage with a fixed interest rate for its entire life?”
He continues: “Labour could demand this from UK banks. It could make the offer of such a mortgage at a sensible interest rate a condition of the banking licence, which every bank must have as a condition of trading. In other words, it can impose this requirement on every bank, building society or other company that provides mortgages in this country.”
“… so that a person or family taking out this obligation will know forever what they have to pay, and will never be caught out in the way that millions have been as a consequence of the unnecessary imposition of high interest rates by the Bank of England over recent years.”
You can see Murphy’s video on the subject, and a transcript, here:
