Friday, October 21, 2011

Savers: subsidising homeowners since 2009

Households enjoy £4bn mortgage windfall

The research found that “about 1.8m borrowers had come to the end of their initial fixed-rate period by late 2010 and reverted onto a variable rate with their lender”. It estimated that the switch was worth “roughly £4bn a year”, or “an average of around £2,600 for each borrower”. The windfall is unusual because lenders’ standard variable rates (SVRs) are typically higher than their fixed deals. However, because SVRs are tied to the Bank of England’s base rate, costs have tumbled following the emergency rate cuts in the financial crisis. Nationwide and C&G offer SVRs of 2.5pc – or two percentage points above base rate. By comparison, a two-year fixed taken out in June 2008 would have cost 6.6pc, according to the Bank of England.

Posted by sibley's b'stard child @ 09:21 AM (1739 views)
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6 thoughts on “Savers: subsidising homeowners since 2009

  • But homeowners are savers too, and here’s a para from http://www.counterpunch.org/2011/09/26/saving-the-rich-losing-the-economy/

    Already insurance companies can make no money on their investments (because of negative real IRs). Consequently, they are unable to build their reserves against claims. Their only alternative is to raise their premiums. The cost of a homeowner’s policy will go up by more than the cost of a mortgage will decline. The cost of health insurance will go up. The cost of car insurance will rise. The Federal Reserve’s newly announced policy (QE3) will impose more costs on the economy than it will reduce. (Well worth reading the full article).

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  • mark wadsworth says:

    “Income tax payers: subsidising homeowners since 1801”.

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  • icarus @1, but are most home’owners’ net savers? I suspect there are a huge number who owe far more than they have in savings or pensions and these are the ones who are being subsidised at the moment.

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  • @ saver – you could be right, my main point was the insurance one.

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  • greenshootsandleaves says:

    To paraphrase that man in the national lottery tv ad, “I’m sure we’re all glad we’ve made a real difference to the lives of these monkeys”.

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  • cornishtinmine says:

    I know several people paying 0.35% above base rate on c £400k mortgages – they are effectively getting about 4.75% return on their debt whereas I don’t own a house or have a mortgage – rents are going up and I’m barely getting 2.5% on my savings after tax – no wonder the housing market isn’t crashing.

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