The Daily Telegraph, July 30, Roger Bootle
Apparently the Government is considering making it easier for people to take out 40 year fixed rate mortgages, at least for first-time buyers. Does this offer a way of solving the current housing and mortgage crisis?
No. This idea falls into an established pattern of governments being fooled into thinking they can achieve something meaningful by addressing the demand for housing rather than its supply.
Or is it that they are merely trying to fool us?
Admittedly, you can easily imagine the benefits to households of having a long-term, fixed-rate mortgage, thereby eradicating the major volatility in their finances caused by changing short-term interest rates.
Mind you, one of the effects would be to make it more difficult for the authorities to control the economy through interest rate policy.
But such long-term fixed rate mortgages are not generally available in this country for a very good reason. Most people would baulk at the idea of fixing their mortgage for 40 years at current high interest rates.
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