Posts Tagged mortgage

Taxpayers will pay £40 billion for mortgage bailout

As part of an emergency rescue plan ministers may be willing to underwrite billions of pounds worth of mortgages according to a recent report, and this could end up costing the taxpayer around £40 billion. The scheme would see the type of guarantee that was offered to Northern Rock extend to other home loans. The scheme is part of the plan that Gordon Brown has been drafting to try and tackle the economic downturn.

It is thought that the scheme could be brought in as early as next month. However, critics are stating that offering to back up the mortgage market with taxpayer’s money would prove high risk. There are a number of risks, which the Treasury is apparently aware of, and this includes encouraging banks to behave recklessly with taxpayers’ money to fall back on.

Sir James Crosby, formerly the Halifax boss, is looking at ways in which the government can help to boost the flagging mortgage and housing markets. An insider from the Treasury stated: ‘One major problem is a lack of mortgage finance, so if there is anything we can do to help with that we should think about it.’ He added: ‘If Sir James comes back with something credible that doesn’t expose the taxpayer to too much risk then we would be wrong not to consider it.’

The suggestion from Crosby involved the government guaranteeing loans from lenders on a temporary basis, and the guarantee would be provided by the Treasury and the taxpayer, which could help to boost lending and revive confidence amongst lenders.

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Many older homeowners still have mortgages

A recent report has suggested that many people in their mid-fifties onwards still have mortgages to pay off, which means that when they reach retirement age they may end up struggling to continue with mortgage repayments rather than being able to enjoy their retirement in comfort and without financial worries. Many may not even be getting a particularly adequate pension fund, but may still have to find money to make mortgage repayments.

It is thought that around one in three middle aged consumers will still be making mortgage repayments when they retire according to a recently report. More than one million homeowners will have failed to clear their mortgage loan debt by the time they reach the age of sixty five, leaving the mortgage debt hanging around their neck at a time when they should be able to relax and enjoy their golden years.

One industry official stated: ‘Many baby boomers are facing up to the reality of still having a mortgage debt close to or even beyond their retirement age. Even those that should be debt-free by 65 still have substantial commitments. It is crucial that the next generation of homeowners do all they can to be debt-free earlier.’

Officials are concerned over how these homeowners will manage on the limited income that comes with a pension, especially in cases where some may be relying mostly or solely on their state pension, which will make it difficult to afford anything other than basic living costs. The average mortgage debt of consumers aged over 55 is currently around £55,000, and this will mean mortgage repayments of around £725.

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