When did houses stop being our homes and become the panacea for all financial ills? No longer is it enough to view your home as a place to eat, sleep and live. Now it is a pension, a means of cheap credit, a sort of personal bank, which just happens to have beds in it.
Figures released this week by the Bank of England show that we are again turning to our houses for financial succour. We withdrew £12.51 billion from the value of our homes in the first three months of this year, continuing an upward trend in equity release that started at the end of last year.
Got a credit card bill you can’t pay? Fancy that new car but can’t be bothered to save for it? No problem, just whack the bill on the house. Take out a bigger mortgage and your bank gives you a big wad of cash, almost as if it’s free. But it’s not.
Instead, a short-term debt means that you pay back your loan quickly. Your monthly outgoings may take a hit, but over the course of the loan, less of your cash finds its way into the bank’s coffers. For example, borrow £10,000 from the bank over five years and you will pay back £11,449, if you borrow at 5.6 per cent — currently the best rate on the market. But put £10,000 on your mortgage at 5 per cent over 25 years and it will cost £17,538. It’s a comparison only a banker could love.
Over five years, with a fixed rate, you know how much that £10,000 will cost you. But over the lifetime of a mortgage, anything could happen. This week the Bank of England held rates steady for the eleventh consecutive month, but who knows how a future Monetary Policy Committee may react to tomorrow’s economic climate.
The Bank of England attributed the rise in equity withdrawal to a renewed consumer confidence in the housing market. Lulled into the notion that property prices can do nothing but rise, we are too quick to strip any hint of a profit out of our homes. But with rising inflationary pressures, there is a danger that interest rates will move upwards.
Low interest rates are underpinning the resilience of an overheated property market. Soaring mortgage costs and falling house prices could arrive in tandem. Homeowners may yet regret their rush to remortgage.
Parliamentary Ombudsman must not be made powerless
The saga of the 75,000 workers who have lost their pensions continues to drag on. These workers lost their pensions despite government-imposed solvency tests for retirement schemes. The Parliamentary Ombudsman, whose job is to hold the Government to task for misdemeanours against the electorate, found that there was evidence of maladministration and said that compensation should be paid. The Department for Work and Pensions (DWP) rejected the ombudsman’s report and refused to pay out. An earlier compensation scheme, worth £2,666 a person, has done little to assuage the anger of these workers.
The ombudsman’s office was established in 1967. On only four occasions in 40 years has a Government refused to hold up its hands in the face of a finding against it. Two of those were this year. The DWP has ignored the ombudsman’s findings on the lost pensions, while the Ministry of Defence rejected its recommendations on compensation to some British citizens interned by the Japanese in the Second World War.
A group of angry pensioners has now launched a judicial review of the Government’s decision through the courts. This week the DWP sent a letter to the solicitors representing the Pensions Action Group, saying it will push for full legal costs if the case goes against the workers.
Historically, the DWP has been lenient on costs if the claimants have little money and the case is in the public interest. This time it is playing hard ball. The Pensions Action Group, which has raised money for the legal costs thus far, believes that it is being bullied by the DWP into giving up the case.
We must all hope that the Pensions Action Group has the wherewithal to continue its fight. Ann Abraham, the current Parliamentary Ombudsman, has talked of the “serious constitutional implications” of ministers’ attitudes towards her findings. If her office loses its power, and ministers adopt bullying tactics to prevent challenges against their authority, how do we hold our Government to account for its wrongdoings?
Make it your policy to avoid unwelcome monkey business
Selfishly, I have little problem with anorexia among the python population. As we report, Basil the python was refusing to eat, a relatively common problem among snakes, apparently. Given his predilection for swallowing small animals whole, and my own fondness for a pet rabbit called Ermengard, my heart fails to bleed for Basil.
But if exotic pets are your thing, proper insurance becomes a top priority. Exclusions kick in if you don’t keep the animal in conditions that match its natural environment. If you don’t feed it properly, your policy will be invalidated. Did you know, for example, that parrots need huge amounts of vitamin A? Petnapping is also an issue: marmoset monkeys are particularly at risk of being stolen to order, says Petplan, the insurer.
You may think that a hamster is as exotic as it gets in your house. But parents inundated with calls for an owl after reading the Harry Potter books should be warned that Pirates of the Caribbean: Dead Man’s Chest features a very cute monkey.
