Today saw our Queen's annual speech at the ceremony of the State Opening of Parliament, a shorter recital than usual, and one which focused on the current economic crisis.
From Government plans focus on economy:
Earlier in a speech to MPs and peers, amid the traditional pomp and ceremony of the State Opening of Parliament, the Queen said: "My government's overriding priority is to ensure the stability of the British economy during the global economic downturn.
"My government is committed to helping families and businesses through difficult times."Gordon Brown then told us of one of his measures - individuals who have been hit by the economic downturn, for example a loss of employment, will be allowed to defer part of their mortgage interest payments for up to two years, thus offering some "breathing space" from the threat of home repossession. From Brown unveils mortgage help plan:
Mr Brown said: "Hardworking households that experience a redundancy or significant loss of income as a result of the downturn will be able to defer a proportion of their interest payments for up to two years while they get their family finances back on track."
Now, what good old Gordon did not say, is that is that this payment deferment amount will simply be added to the customers outstanding mortgage debt after two years,, perhaps interest free initially as stated, but thereafter interest will be charged. So, in effect, after a couple of years, these "hardworking households" hit by the "downturn" will simply have an even larger mortgage based on an ever depreciating home value. In effect, they are simply increasing their mortgage debt. Note too, that the BBC's in vogue business editor (and Mr Brown's biography writer) calls this a clever scheme.
For example. if one has a 100,000 mortgage at a 7% rate with and a 20 year term, then one's monthly interest payment is £583.33. Multiply that over a 24 month period, then we have £14,000, to be added to the debt after two years. At the same 7% rate, the monthly mortgage interest payment then jumps to £665, an increase of 81.67 per month, £980.04 per annum. With 18 years left on the mortgage, you pay an extra of 17,640.72. (These calculations ignore capital repayments, I could expand)
Yes Mr. Peston, a clever, very clever scheme.
Mr. Peston's wikipedia photo - note background