Losing interest

I BOUGHT a house in 1992. Bad move. Long story. The best fixed-rate deal I could get was 9.9 per cent for five years. I remember the figures well because a month later, despite the then prime minister’s promise that the UK would never leave the European Exchange Rate Mechanism (ERM), the UK left the European Exchange Rate Mechanism (ERM).

So while everyone else’s mortgage interest rates were falling, mine stayed the same. That’s what happens when you trust the word of a Tory prime minister, I guess, so it served me right.

Now, I can see the comments already: “John Smith and the Labour Party supported Major’s ERM policy at the time…”. Yes they did. And they were wrong. But it was Major’s policy and Major’s responsibility. And Black Wednesday was his, his chancellor’s and his chancellor’s special advisor’s legacy.

The Bank of England base rate today is five per cent. Mortgage rates paid by home owners today are far, far lower than anything experienced during the Tories’ wasted years. Times are very difficult for those hoping to move house (and let’s face it: most of the criticism of yesterday’s stamp duty announcement is based on the fact that it was announced by a Labour government). But we would be kidding ourselves if we claimed that things wouldn’t be an awful lot tougher if we were experiencing the kind of interest rates the Tories inflicted on us.

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20 Comments

Filed under Conservative Party, Economy, Labour, Politics

20 responses to “Losing interest

  1. Johnny Norfolk

    But Tom the rates have been to low for to long this is part of what has caused the problem today.

    The prospects are far worse today than the 90s as Darling said.

    I rember the last Labour government when rates were near 30% you appear to have forgotton that.

    Why did you allow 125% mortages, why did Brown change the banking rules to allow lenders to do what they want, Stop blaming the past Tories and sort out your mess.

  2. Johnny – so now you’re in favour of the government running banks’ business for them? Shouldn’t the market decide what packages to offer customers? And do you really think that families who are finding it difficult enough to cope at the moment would thank us if we intervened to increase interest rates?

    Johnny, your faith in government intervention is quaint – perhaps your views are better suited to the Labour Party’s hard left…

  3. It is not for the government to intervene, the market should be allowed to perform. However, to stop businesses ripping us off and stitching us up, we have regulators. This is where the major failing lies. The FSA warned the mortgage industry back in 2000 that they were lending recklessly, but did nothing to stop that lending when the FSA started regulating mortgages, in fact it got worse. Part of the blame then lands with the chancellor at the time for failing to ensure that the regulator was doing it’s job.

    It’s all very well making the comparisons with the early 90s, this is purely useful from a political point. People have borrowed way too much money and cannot afford the repayments even at these historic low rates. These people do not care that it is not as bad as the 90s.

    I understand making the comparison to deflate the Tories high standing but political point scoring does nothing to help the economic situation.

    Do you think the pound will now rally because ‘it is not as bad as under the Tories?’ The pound is diving which will boost inflation, the price of petrol at the pump, gas and electricity and foodstuffs.

    This government needs to wake up and realise that we are going under unless they can show some leadership.

  4. James

    Tom, I really, really do try to understand your logic, but often fail with today being no exception.
    I too, bought a property around that era, on an endowment mortgage. But considering today’s over-inflated house prices, my mortgage would have to be at least FIFTEEN times the amount it was back then. You don’t have to be clever to work out that paying upto 17% interest (I think that was the max I paid, it varied between 6-17%) on that small amount was peanuts compared to the 8% (?) interest now on a 15x mortgage even taking into account inflation and wage increases.
    Also if you added up the total sum you’ve paid {mortgage + interest) since 1992, you, like me must have a fair amount of equity in the property.

  5. Madasafish

    Tom
    I bought my first house some 20 odd years earlier than you! If I applied the same logic at various times your argument would have said the Conservatives or Labour had improved things.. I have a list of our mortgage interest rates form 1969 somewhere.
    It depends on inflation and the economic cycle whom to blame or praise.

    Which brings me to:
    inflation – conquered by a Thatcher Government.
    And the economic cycle. – abolished by Gordon Brown in his own words.

    So the current housing problems are your Government’s fault. ALL yours.

    I do not seriously believe that : but that is what Mr Brown’s public pronouncements have claimed.

    And now you complain no-one gives you credit for improving things. Surely it is obvious?

    You claim credit for things you cannot claim 100% are a result of your actions. And deny any responsibility for anything going wrong.

    Credibility. A total lack of it. On anything financial Like the chancellor’s economic statements over the weekend or his Budget growth assumption of 2.5 to 2.7% this year.

    Even the OECD contradict Gordon’s claims..

    “The OECD said that Britain would fare worst amongst the Group of Seven leading economies. Until recently, Gordon Brown would regularly boast that Britain was the best performer among the G7, which also comprises Canada, France, Germany, Italy, Japan and the United States”

    http://www.guardian.co.uk/business/2008/sep/02/economicgrowth.creditcrunch

    The OECD are not Conservatives. 🙂

  6. If Thatcher conquered inflation, why did it go up to more than 10 per cent a few weeks before she was deposed? It may be uncomfortable to accept, but it is a fact that current interest rates – and even inflation – are at historically low levels by UK standards. And yes, that is to the credit of this Labour government.

  7. Madasafish

    Tom
    Inflation was 30% in the 1970s .
    By 1997 it was around 5%.

    And to Labour’s credit they have kept it low.

  8. Angelin

    Surely it is up to the individual to be responsible for the level of borrowing they commit to?
    Even with the relatively low interest rates of recent times tens of thousands have acted irresponsibly (partially the lender’s fault) and borrowed far in excess of affordability.
    Some of the store cards have rates of 20-30% and yet these people still spend spend spend without regard to the debt they are accumulating.
    Interest rates should be low (who do I praise, BoE or Labour?) and just as I believe Labour would have joined the ERM if in power in those days so too would the Tories have lowered interest rates if in power today. Do not blame Labour because they are low (Johnny Norfolk), blame those who by nature of greed and irresponsibilty have caused house price inflation.

  9. Zorro

    “So while everyone else’s mortgage interest rates were falling, mine stayed the same. That’s what happens when you trust the word of a Tory prime minister, I guess, so it served me right.”

    No Tom that’s what happens when you listen to a politician. And yes it does serve you right. I hope you’ve learnt now you should never do that!!

    What exactly are you complaining about here? Should the Tories have spent the entire GDP of the UK to try to stay in the ERM, merely to avoid annoying you personally by ‘disadvantaging’ you when compared to some others who saved some money you didn’t??? Seems liks a bit of a selfish attitude for a Labourite.

    Oh yeah inflation is very low right now. Keep this up Tom! You could end up with a lucrative ‘stand up’ career.

    But I have to say it’s very very good to see a Labour minister admit that the Labour leadership at the time (including our current great leader) did agree with joining the ERM.

    However I’m not really sure how you can say “But it was Major’s policy and Major’s responsibility. And Black Wednesday was his, his chancellor’s and his chancellor’s special advisor’s legacy.”

    The only reason this is Major’s fault is the fact that your lot hadn’t managed to depose him at that point!!! Had you been in power in 92 then your lot would have joined and it would have been Labour’s legacy.

    That’s one of the main reasons I hate Gordon Brown so much (and yes that is a very very very long list). Because he’s got the bare faced bloody cheek to stand up in the HoC and have a go at Dave about that. When he supported it. What an absolute bloody hypocrite.

    And you too now saying the same thing even whilst admitting your lot agreed – I guess I’m not aloud to swear here so I’ll just sign off. I think you can work out what I think of you for writing that, I don’t need to use any four letter words!

  10. joe bonanno

    I clicked through from Iain Dale’s blog.

    God alone knows how this blog is in the top 100 ‘left of centre’ let alone top of the top 100.

    The Labour Party sorry New Labour Party is imploding and so the government is imploding, the housing market is imploding, the pound is imploding, and the economy is imploding.

    None of this gets a mention on the blog; what does end up on the blog is minor and uninformed sniping at the Tories and meandering tales of you walking the dog and picking up a newspaper on the way home.

    I am in any case of us bemused by the term ‘soft left’ and read it as a philosophy that believes in mildly tinkering with the status quo with a view to staying in power for the baubles. Vote soft left for a Britain slightly different from the one we have now, but only slightly different.

    How is the ‘soft left’ going to solve the problem of getting the 1.6 million on Incapacity Benefit (or whatever it’s called this week) who are swinging the lead off benefit and into work?

    What’s the ‘soft left’ strategy on stopping kids murdering eachother? Let me guess, another ten years of hugging them.

    What’s the ‘soft left’ strategy on getting 1.5 million unemployed back into the jobs that they should be doing rather than than a million Poles?

    I bet you have not got one clue.

  11. Joe – thanks for the fan mail.

  12. Angelin

    Never knew you had a dog Tom.
    Just learnt that Alex Salmon intends to replace Council Tax with a local income tax, within a year.
    Bloody brilliant I say. It is such an unfair tax.
    Labour need to put a big one out of the hat to win a 4th term how about this one?

  13. Madasafish

    I would welcome a local income tax.

    I would save thousands.

    Mr Salmond can only make it work if I recall by getting the Treasury to give him a very large sum of money every year. I cannot remember the amount (ÂŁ400M comes to mind?)

    The Treasury will refuse: and he’ll blame Labour and hey ho Independence for Scotland.

    Mr Salmond makes Scottish Labour Political leaders look amateurs.

  14. James

    I agree Council Tax is very unfair.
    Two examples:
    A family member lives with her child in a bungalow. She qualifies for the 25% single adult reduction. Next door in a similar now extended bungalow lives a middle-aged couple and their adult son, together with one of their (pensioner, although she works)parents. Because they have put another entrance to the pensioners living space this is classified as an annexe thus no council tax due, the other part of the bung is then classed as semi-detached thus in a lower band. So 4 wage earners end up paying just a few quid more than our family member.
    Case 2. My son purchased an ex-authority derelict end of terrace. He spends all his spare time ‘doing it up’. As this has taken more than 12 months (he is virtually having to rebuild) he now has to pay 100% council tax. The other 3 houses in the terrace consist of 2 single occupancies ,25% discount each and a couple on benefits, council tax being paid for them. So for an empty property, not yet fit for habitation, my son pays more than those occupied ones. He also makes a contribution to my council tax as he is the second adult in my house. Completely unfair system.

  15. Patchouli

    Labour pledged to increase mortgage ownership by 1 million by the next election in its 2005 manifesto. Given the housing market from 2005 to date, would you set out what the government is doing to achieve this pledge? Thanks.

    To Joe B: Tom is a master wind-up merchant with a healthy sense of humour, hence his popularity.

  16. Quentinthecrisp

    If Salmond pulls it off I’ll definitely consider moving up to Scotland. Together with the other advantages i.e. healthcare etc it’ll be well worth the upheaval.

  17. Madasafish

    I too would move back to Scotland. Free nursing home care, free prescriptions, lots of people on benefits..
    Just my sort of place..

    Meanwhile Charles Clarke..the fat failed former Government Minister – is worried that Labour are headed for disaster at the polls.

    http://www.newstatesman.com/uk-politics/2008/09/labour-blair-british-current#reader-comments

    Of course if you are not a former Minister you would not realise it so he’s telling us soemthing really new.

    🙂

  18. It has been bizarre how the MSM, particularly print on some aspects, have covered both the Decca interview – Darling clearly meant the world economy (and even then was a few decades out); and the OECD man who was being a talking head all day Tuesday and saying that the UK wasn’t in bad shape, that four G7s had preceded us into small negatives and would be flat as we went into small negatives in Q3.

    The Guardian don’t even mention this man or his sensible analysis or the facts about Germany, France, Italy and Japan being in negatives in Q2. And that is the Guardian. In fact the man told R5L that the instruments they used were precise but not accurate enough to put too much weight on the difference between say flat, +0.3 and -0.3 which may be the spread for most of the G7 during Q3. Not covered.

    Having said that it was the Guardian’s front page sensationalisation of a sensible, stating the obvious point about the world economy which set the ball rolling. As Da Fink said on Newsnight on Monday everything but everything the government do is being levered into this strongly negative narrative. he seemed almost sympathetic about this.

    Most weeks I do between 20 and 40 interviews in people’s homes on various surveys and I’m finding a level of spontaneous sympathy for Brown if politics comes up. Smarter than the press many of them. And I’m mostly not doing social or political surveys just now.

  19. PS When they describe Charles Clarke why do they say an unqualified “former Home Secretary” instead of saying “failed Home Secretary of 19 days” or whatever it was. Hell hath no fury like hubris spurned.

  20. Maybe what you say is true, however it’s not why the policies announced aren’t the sweetener they seem. The problem is simply that our rental sector is appalling, where do you think prospective home owners come from, they’re in the rental market before they buy.
    And what does the rental market do? It gouges money from people who need somewhere to live and limited options and time. Charges are levied out of all proportion to sense for changing dates on a rental form, rolling leases are denied and no effort or incentive is given by the government for improving the energy efficiency of a home. Sure, there are schemes, but renters pay the energy bills that go up whereas the landlord and letting agent deal with the hassle and expense of reducing bills by replacing boilers or installing insulation. Or even double glazing. You can count the number of double glazed rental properties in my prosperous neighbourhood on the fingers of a single hand. If I go out to buy a house I get presented with a HIP showing energy efficiency. But if I rent, and let’s remember, rented property changes hands more often so a HIP like system would have more effect, I have no such access to energy efficiency information.
    Sort out the rental sector (why are we building homes and flats to sell to buy-to-let, why not build to let in the first place?) and you can keep your tax from stamp duty and you can deny money to bloated private utilities and save the planet at the same time. Sounds great, doesn’t it. Well, get on, and do it. I’m sick of wasting money in a poorly insulated old and knackered house.

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