Mortgages: Boris gets something right

It sounds like another crackpot scheme to shore up the housing market, in the baleful tradition of Help to Buy. Yet the idea of long term fixed-rate mortgages, plugged again this week by the prime minister, may be rather less daft than George Osborne’s expensive folly. The true cost of that little crowd-pleaser is only now becoming apparent.

A research paper from the London School of Economics concluded that it worked fine in areas where it was not needed, while pushing up prices in areas of the country which were already expensive. It has done nothing to stop the rise of the resentful renter, now often in her mid-30s. Twenty years ago, three-quarters of 32-year-olds owned their own home. The latest figure from the Office for National Statistics is around half.

Like so many superficially attractive schemes, Help to Buy is easy to start, and politically almost impossible to stop. The housebuilders, wallowing in windfall profits, are lobbying furiously for a further feast from the trough. Long-term fixed-rate mortgages present the perfect reason to fend them off, and might even help “generation rent” into houses they want to live in, rather than buying a ticky-tacky box as a desperate first step onto the housing ladder.

As the Centre for Policy Studies has argued, a 95 per cent repayment mortgage is not a problem for a good borrower if the interest rate is fixed for 20 years ahead at a price he can afford. Stress tests for rising interest rates become irrelevant for both lender and borrower. Today’s ultra-low interest rates – the UK government can borrow for 30 years at under 1 per cent – provide an unprecedented opportunity.

The banks are not the natural lenders of this long-term money, but the life companies and pension funds are desperate to find assets which match their long-term liabilities, and which actually yield something.

Still, there is no idea so good that government interference cannot muck it up, and the prime minister’s suggestion of government guarantees for these mortgages sounds suspiciously like yet another expensive mistake in the making. Far better to set the rules to encourage the natural lenders and let the market work. Oh, and please scrap the wretched Help to Buy.

Well, we can all dream

“Listen to what the government ministers are saying, and bet on the opposite happening” has never been more apposite than this week, as the Conservative virtual party conference thrilled us all.

Here is the chancellor telling us about the sacred responsibility to balance the books, when we all know it cannot be done, especially when he is still pursuing his open chequebook policy. Neither growth nor tax rises will eliminate the deficit, and until the markets start to fret at the speed of money printing, Rishi Sunak will be able to bask in the sort of warm glow few chancellors ever see.

Then came the prime minister’s green dream of wind power for all, with the vista of thousands of happy workers churning out turbine blades for the world while we drive around in our electric cars. This is a virtual reality which could only be sustained in front of a virtual audience.

If the offshore wind target of 40 gigawatts (up from 10GW today) sounds familiar, it’s because we’ve heard it all before. In 2007 the Labour government promised 33GW by 2020. To realise the updated fantasy requires a new turbine (probably made in China) to be planted every weekday for the next decade, at a cost of perhaps £50bn. Even if this was physically possible, the climate sceptics at the Global Warming Policy Forum calculate the investment as equivalent to a 200 per cent rise in electricity prices.

This is little more than a guess, but the same can be said of the true cost of wind power. Add in the need for (gas) back-up when the wind doesn’t blow, expensive maintenance costs and the reconfiguration of the electricity grid, and it is far more expensive than the headline suggests.

Still, we apparently have money to burn, whatever Mr Sunak’s Augustinian words. HS2, Hinkley Point, hydrogen home heating, electric cars and tax cuts as well …O, brave new world!

Not following the science

Back in the real world, here’s a sad little example of how sentiment beats science. In western Cumbria, an area not over-endowed with employment possibilities, the (Labour) council has approved a new coal mine. A coal mine! Such a dirty, polluting, regressive proposal cannot possibly be allowed, and the wretched Robert Jenrick, he of the Isle of Dogs print works scandal, is dithering about whether to stop it.

The usual suspects are urging him to do so, as you would expect. Never mind that this mine would not produce coal to burn in power stations, but a higher grade that is needed to turn iron into steel, and which is currently imported. Never mind about the 500 local jobs it would create. Don’t give us the facts, we’ve already made up our minds.