View more on these topics

We need new way to cool economy

With around 70 per cent of borrowers being on a fixed rate, how effective are bank base rate moves at curbing spending and cooling the economy? With only three out of every 10 people seeing an increase in their mortgage payment next month, how quickly will people’s propensity to spend be affected?

Certainly, with a trillion pounds worth of unsecured borrowing out there, people will see their credit card payments and loan payments increas, but the biggest impact, I suspect, will be on those already on the periphery of affordability.

Obviously, base rate movements affect more than just mortgage payments. It also has a substantial effect on our industry and exports but does a rate rise have the same effect that it had, say, 10 years ago when the ratio of fixed-rate loans was significantly lower? Is it now time to look at other methods of deterring the public from spending?

I am the last person that would ever want to push for more tax but taxation has an immediate effect, affects everyone who earns, not just those with credit and, therefore, surely is more effective and fair.

Again, I am not endorsing more tax but it seems as a nation we have become more financially savvy and more effective at protecting ourselves against the impact that base rate rises once had.

We need a more sophisticated tool or tools to keep a cap on our economic growth.

The Bank of England must see the effects of a rate change take longer to kick in so could we see more rises as it continues to try and cool inflation?

The end-result may be that it overshoots its mark and the economy is damaged rather than restrained.

The availability of credit could well be an option to explore and the FSA does have affordability on its radar.

With arrears, IVAs, bankruptcies and repossessions on the increase, it could be justification to explore how borrowing limits are set and even to impose legislative controls.

Controlling access to credit will certainly effect people’s ability to borrow and spend and may help prevent some from creating a problem for themselves.

The level of borrowing an individual can undertake has risen sharply in recent times, with lenders offering six times salary or a credit decision instantaneously.

Credit is certainly helping to fuel the economy and drive inflation. Banks are happy, look at their profits, but should there be a greater accountability?

Jonathan Burridge is managing director of Quantum Mortgage Brokers.


HSBC says corporate pension schemes are already working

HSBC says it does not see the need for personal accounts because corporate pension schemes are working already.Speaking at the ABI conf-erence, head of pensions and retirement income Ian Martin said the bank writes around 60 corporate sch-emes a week in the small and medium-sized enter-prise market.He said: “This is not the silver bullet to […]

Higher rents boost yields on buy to let

Buy-to-let activity has remained consistently strong despite concerns over rising borrowing costs.Figures from Paragon Mortgages show that landlords have been raising rents and buying new properties.Average buy-to-let rents have risen by 6.5 per cent over the past quarter from £9,942 in January to £10,591 in April, according to Paragon’s buy to let index.Total returns, taking […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm