First Rule of Home-Owner-Ist Club

House prices may not fall, whatever the cost (to the taxpayer). From The Torygraph:

Government failure to provide support for struggling homeowners will trigger a “tsunami of repossessions” which will damage house prices, experts have warned.

And who are these experts, pray tell?

Andrew Wishart, of Capital Economics, a research firm, said: "We now forecast that the unemployment rate will rise from 3.8pc to over 5pc, which will push up repossessions, though they should remain well below the levels reached in the house price crashes of the early 1990s and 2008." Capital Economics has forecast a 7pc house price drop over the next two years...

The article does not say on whose behalf they did this research, he who pays the piper calls the tune. And there are another three years to go before it all collapses again, they should know that by now.

A Government spokesman said: “We recognise people are struggling with rising prices which is why we are protecting the eight million most vulnerable families with at least £1,200 of direct payments this year, with a £150 top-up payment for disabled people.”

Why would banks lend shed loads of money to the "eight million most vulnerable families", knowing that any rate rises would tip them over the edge? Because they know the government will bail them out? It works out far cheaper (i.e. saves the taxpayer money and makes a reliable small surplus year on year) just building council housing for them.

And it's another reason for simply nationalising all lending to home buyers. Why let commercial banks make hay while the sun shines and bail them out when it starts raining? That way the taxpayer gets the profits in the good times, as well the losses in bad times. Without house price/credit bubbles and reckless lending, banks would be far more resilient and there'd be no need for taxpayer-backed bail outs.

"Mortgage rules eased as Bank of England scraps affordability test stokes the flames in the run up to the next big crash in 2025-26"

From The Independent:

Mortgage borrowing rules have been eased by the Bank of England making it easier for thousands of potential homebuyers to get on the property ladder.

It will not make it easier (i.e. cheaper) for first time buyers, it will just force them to borrow larger sums to pay higher prices for what they would have bought anyway.

The affordability “stress” test forced lenders to assess whether people applying for a mortgage would be able to cope if interest rates rose to 3 percent.

The Bank of England said that the change should not be seen as a “relaxation of the rules”, adding that a number of other measures still in place “ought to deliver the appropriate level of resilence to the UK financial system, but in a simpler, more predictable and more proportionate way.” The test was introduced in 2014 following the 2008 financial crash and was designed to stop reckless lending to people who could not afford it.

But hey, let's allow reckless lending again, now that what happened fourteen years ago is fading from memory. It's like banning guns, seeing gun crime fall and then legalising them again on the basis that gun crime is low.

Another rule, which is still in place, limits most new mortgages to a maximum of 4.5 times a borrower’s income. The Bank of England’s financial policy committee said in 2021, after a review of the rules, that this other limit “is likely to play a stronger role than the affordability test in guarding against an increase in aggregate household indebtedness and the number of highly indebted households in a scenario of rapidly rising house prices.”

FFS. How is borrowing 4.5 times your income, especially if it 4.5 x joint income of a couple, not reckless? Back in the sensible days of Georgism Lite, that limit was about 2.5 x main earner's income.

Added to a decent deposit, that's enough to pay for the bricks and mortar value or the cost of building a new one (with a sane profit margin for the builder), which depresses the price paid for the land/location value, hooray. We know this is true because they were building plenty of new homes for FTB's during Georgism Lite (landlords were frozen out by rent controls, tenant protection and high taxation of unearned income), and the insurance value of housing was pretty close to how much they cost to buy.

Collecting land rent without LVT

There are of course three main ways a government can collect land rent.

1. Just own land and buildings and rent them out. That way there is no need to differentiate between rental value of buildings and of the location. We have that with Crown Estates and Housing Associations (which are QUANGOs and ultimately part of the government) who rent out at or close to market value and council housing, which is supposed to be there for lower income people who can't afford lower market rents.

2. Replace other taxes with Land Value Tax.

3. Lend money to people wanting to buy land and buildings and collect the interest, which is mathematically similar to Land Value Tax. It is largely the private banks that do this, of course, but there is nothing to stop the government doing it.

Somebody asked me about 3. recently, and I did some workings for them. In a perfect world...

a) The goverment, which runs HM Land Registry would simply no longer register private mortgage charges. The same as I can't borrow money secured on my right to vote. That's not for sale. If banks want to make huge unsecured loans to people and just rank along with all other creditors in case of non-payment, there's nothing to stop them, but I doubt they would (see tweaks).

b) The government sets up its own mortgage bank as monopoly mortgage lender, which has easy to access to a bottomless pit of funds i.e. government bond issues.

c) The bank knows what monthly payments people can afford (local rents, mortgage payments for FTBs, there's no right or wrong answer, if it's too high, people won't pay it), and can work backwards from that to choose a suitable combination of income multiples, mortgage term, target house prices and interest rate.

Worked example, at today's prices with private banks: Our average borrowers buy a house for about 7.7 times their income, or £280,000. Knock off ten percent deposit, and prevailing interest of 2%, the monthly repayments would be £938 for 30 years.

The government chooses the following combination:
- Max loan-to-income four or twice joint income,
- Deposit minimum 10%, max 20% (see tweaks),
- Mortgage term 35 years (or however long borrowers have before state retirement age, also up to government to decide),
- Average house prices to level off at about £145,000 (four times income plus 10% deposit),
- The required interest rate, to get monthly repayments of £936 (same as now), would be 8%.

d) The government bank can borrow for about 1%, being backed by the UK government and mortgages which are secured on assets that can only go up in value (in line with wages). So in future, the government bank's profit (monthly repayments IN minus net selling price and interest paid (directly or indirectly) to the vendor OUT) is about £6,000 per year per average home.

e) There's no need to worry about Poor Widows In Mansions, they will have paid off the mortgage and will be left in peace (having pre-paid the land rent before retirement).

f) Once the system is up and running and all houses have been bought and sold, the bank's net profit would be - in theory - £100 billion a year (tricky to calculate, assume two-thirds of homes are subject to mortgages and one-third owned by mortgage-free pensioners).

g) Even if it's only half that, it's a handsome chunk of money, enough to replace Council Tax, SDLT, planning fees and so on with plenty left over.

That is the general idea. It needs some tweaks. Clearly, movers would have to be allowed to 'port' an existing government mortgage and existing equity. Apart from that, there shouldn't be any cash buyers. If you want to buy a house, you just HAVE TO take out a government mortgage for 80% of the purchase price.

When a house is inherited, the government bank would give the executors a deposit with itself for 80% of its value and grant an 80% mortgage under the same terms and conditions as any other buyer. If the heirs want to continue living there, great, they can spend the deposit on subsidising their monthly repayments (effectively cut them by half). Which is Inheritance Tax in all but name, so we can scrap IHT as well.

They (want to) own land! Give them money!

From the BBC:

... Boris Johnson has promised low-deposit mortgages to help young people get onto the housing ladder.

In an interview with the Daily Telegraph ahead of his party's four-day conference, the prime minister said he had asked ministers to work up plans for encouraging long-term fixed-rate mortgages with 5% deposits.

"We need mortgages that will help people really get on the housing ladder even if they have only a very small amount to pay by way of deposit, the 95% mortgages," he said. "I think it could be absolutely revolutionary, particularly for young people."

Haven't we been doing this for decades - ramped up with Help To Buy - and simply seen house prices increase to soak up the extra borrowing?

"Can you get a mortgage on a house being sold below market value?"

Mike W spotted a rather strange Q&A in The Guardian, and added "If I make an offer and you accept, I always assumed that was 'market value'. Indeed, 'marked to market' surely? What the hell do they mean here?"

The mortgage adviser replies: "However, not all lenders are prepared to lend to people buying property at less than market value."

Which really is baffling. You'd expect lenders to be paranoid about lending on homes bought for more than market value, but not the other way round.
---------------------------------------------------
On the subject of "below market value", I was chatting to somebody who lives up the road who nearly got a massive sitting tenant's discount when they bought the house they had been renting for four years. Unfortunately, the owner's ex-wife got wind of what they'd shaken hands on and slashed the sitting tenant's discount by about half (they still got a fairly good deal).

I told him that we got the full sitting tenant's discount, we'd been paying rent for six years, and the owners wanted to sell. To my amazement, they accepted our cheeky offer, which was effectively the easily achievable selling price* minus five or six years' rent.

* If they'd put in another £10,000 or £20,000 to smarten the whole house and garden up a bit (all the stuff we've been doing ourselves for the last six years), they could have sold it for a lot more than that, but (thankfully) they couldn't be bothered.

"Supporting the housing market"

From the BBC:

On Tuesday, Nationwide - one of the UK's biggest lenders - effectively pulled out of new deals... Nationwide will now only offer home loans to those with 25% equity or more.

It rules out first-time borrowers or existing homeowners with little equity in their home... [this] will allow it to "focus on supporting existing mortgage members, while continuing to process ongoing applications", it said.

Nationwide blamed "an extremely high number of enquiries about existing mortgages and ongoing applications... That is why we have taken this decision on a temporary basis although, by continuing to offer home loans up to 75% LTV [loan to value], we can continue supporting the housing market."

Other lenders that have taken similar action include Santander and Skipton Building Society but many have gone further, by reducing the loan-to-value ratio to 60%.

On a practical level, you can see why they have retrenched a bit. By "supporting the housing market", what they actually mean is "keeping house prices as high as possible".

In the short term, if potential sellers expect things to return to normal and prices to rebound, then they will hold off selling and we would expect the number of transactions to plummet, Zoopla says by as much as 60%.

But... what if all lenders increased the deposit requirement to 25% or even 40% (call it 30% on average) on a permanent basis? First time buyers have a fixed amount of cash to put down as a deposit, and sooner or later, the Bank of Mum & Dad will run out of things to remortgage. According to this, average FTB deposits are 15% of selling prices. The deposit is a limited/fixed amount of cash, so we would expect selling prices to halve.

Which would be great news for every tenant in their twenties and thirties!

Bank of Mum and Dad

From the BBC:

Parents spend so much money to get their children onto the housing ladder that they are now among the biggest lenders in the UK, a survey suggests.

The average parental contribution for homebuyers this year is £24,100, up by more than £6,000 compared to last year, according to Legal & General (L&G).

Collectively parents have given £6.3bn, high enough to rank the bank of mum and dad 10th if it was a mortgage lender. Clydesdale Bank, the UK's 10th largest mortgage lender lent £5bn last year...

L&G's research, based on a poll of 1,600 parents, found more than half were using cash to help their children, but others were withdrawing money from their pensions or said they would consider using equity release from their homes.

Is it just me, or has the world gone completely mad?

Older generations, who own most of the housing, are taking out second mortgages to give their children money to buy housing?

At the level of an individual family, this might make a warped sort of sense, but collectively is is a massive Ponzi/pyramid scheme. Old people borrow money to lend it to young people so that they can sell their assets to young people for inflated prices, there being no net gain to anybody apart from banks and large landowners.

I also wonder how many of those who borrow from BOMAD disclose the fact on their mortgage applications...

Putting out the fire with gasoline

Emiled in by Lola, from FT Adviser:

The mortgage market needs more flexibility to help young people onto the property ladder, the Financial Conduct Authority has stated.

In its discussion paper on intergenerational differences, published yesterday (May 2), the regulator stated the working ways of ‘millennials’ — those between 23 and 38 years old — meant fewer young people were able to prove to lenders that they could afford a mortgage policy. It said those with less reliable and stable sources of income, such as self-employment, zero-hour contracts or agency work, found it harder to pass standard affordability assessments.

The FCA also pointed out that there was more movement between the workplace and further education as young people tended to join the labour market, go back into education, then enter the labour market again later. This required greater flexibility in the mortgage space, the City watchdog stated.

The FCA also noted that a steep rise in house prices compared to wages had stifled the younger generation’s ability to buy a house. According to the ONS, house prices in real terms have increased by 259 per cent in the past 30 years, compared to a 68 per cent rise in wages.

The FCA stated schemes such as Help-to-Buy had gone some way to help young people meet the cost but stressed many other consumers turned to the ‘bank of mum and dad’ or other family members, such as grandparents, to raise the funds. Last week, a House of Lords committee stated younger generations needed more support from older generations to afford property than ever before and urged the watchdog to ensure the market allowed for innovation.

In today’s report, the FCA encouraged more innovation in later life lending so older generations can benefit from products that meet their needs to maintain living standards once retired as well as provide younger family members to purchase a house.

By some bizarre circular logic, they recommend exactly the opposite of what it would take to 'help people onto the housing ladder', which is to restrict mortgage lending to two-and-a-half times earnings, or twice earnings for a couple. In the good old days, banks and building societies would not take rental income into account, which is why BTL lending was unheard of.

But this is traditional as we approach another resulting peak in house prices (actually land prices). It'll all go *pop* again in 2025-26.

The thin end of the wedge

From the BBC:

Some 140,000 homeowners are trapped on high interest-rate home loans with unregulated or inactive firms, and are unable to switch to a cheaper deal. The Financial Conduct Authority (FCA) has now said it is considering a change to its affordability checks.

This could allow these people to switch to deals that are easier to pay. At present, they are stuck on high default rates, owing to an FCA requirement - introduced in 2014 - for mortgage holders to meet strict affordability criteria when they apply for a new fixed deal.

OK, so Annie and Bert, took out a six-times income, 100% LTV mortgage under the old reckless lending rules but banks can only lend a 'sensible' multiple like four-times-income. They'll make an exception for Annie and Bert.

What about Claire and David next door, who took out a four-times-income and have done equity release to 'tap into house price growth' and now owe six-times-income?

What about Ellie and Fred across the road who took out personal loans to pay a deposit and a four-times-income mortgage who also owe six-times-income?

If that's OK for Ellie and Fred, what about Georgina and Harry, first time buyers who want to borrow six-time-income but can't? Can they reverse engineer Ellie and Fred's position by taking out two-times-income personal loans and using that as a deposit for a four-times-income-mortgage?

Where's a loophole, there's a way.

Rent-to-own buyers vs mortgage prisoners

Both these stories came out in the past couple of days, it's an interesting compare and contrast.:

1. From the BBC:

Plans to cap the costs of buying domestic goods such as TVs and fridges through rent-to-own shops have been welcomed by the stores' customers...

First, the FCA will limit the amount of interest that customers pay. From April 2019, they will pay no more in interest than the cost of the product itself. So if a cooker costs £300, they will pay no more than £600 in total, including the cost of credit.

However, rent-to-own shops will still be able to charge for insurance and warranties on top of that.

Second, the cost of the goods themselves will be limited. Shops will be able to charge no more than the median - i.e the middle price - of three mainstream retailers.

Whether those high interest rates are justified, bearing in mind the default risk and the cost of collecting regular small payments I do not know. Their 2017 accounts show a profit margin of 5% on sales for 2016 and a huge loss for 2017. So probably they are justified overall (half of customers get ripped off; the other half default, same as Wonga).

2. From City AM:

In the years leading up to the 2008 financial crisis, lenders were dishing out large mortgages and asking for tiny deposits in return. Property values were rapidly outpacing wage growth, and buyers were being allowed to borrow eight times their annual salary.

For many homeowners, the problems started after the crash when the regulators forced the banks to toughen up their lending criteria. This meant that people with large mortgages couldn’t negotiate a better deal – either because they no longer passed the affordability checks, or because their credit rating had been damaged.

As a result, tens of thousands of people are now “mortgage prisoners” – trapped on their lender’s high-interest standard variable rate (SVR), paying hundreds more each month than the average fixed-rate deal.

... the real sticking point is a piece of EU law known as the Mortgage Credit Directive (introduced in 2016). Essentially, this directive is stopping the banks from waiving affordability criteria – even for those borrowers who want to move to a new lender without increasing the size of their debt.

That's a foul excuse. Why can't the government just cap the interest rate payable by "mortgage prisoners", the same as they are suggesting for the rent-to-buy sector?

... while all of this is positive, Nicky Morgan points out that this does nothing to help the 140,000 customers who have mortgages with inactive lenders like Northern Rock and Bradford & Bingley.

The mortgage books of those two banks were run by the UK government, so they wouldn't have needed to do anything legal or formalistic, just drop the interest rate a bit, nothing to do with the EU, job done.

Only they can't do that any more because they have sold the mortgages on to other institutions who now want their pound of flesh, and who could probably accuse the government of misselling them the second-hand mortgages.

I would also assume that this is just a back door way of allowing 100% mortgages again.

Bubblicious!

Emailed in by Lola, from The Telegraph, which devotes a lot of column inches to pushing 'equity release' schemes:

Interest-only mortgage holders with no way of paying off their loan could be handed a lifeline, as major banks look to get these troublesome customers off their books.

Virgin Money has signed a deal with one of the biggest equity release providers, insurer Legal & General. It offers customers the opportunity to switch from an existing interest-only loan to a lifetime mortgage with the insurer.

(And yes, the article contains a link to another paid for puff piece pushing this.)

Hey ho. It's a sliding scale of twattery:

1. In the good old days, you could pay off a mortgage in ten or fifteen years, most of the monthly (or weekly?) payments were principal and some of it interest. The outstanding loan was paid off quickly.

2. House prices have been pushed ever higher and nominal interest rates ever lower, so a normal first time buyer mortgage can only be paid off over twenty-five to thirty years. Most of the monthly payments are interest and some of it principal. The outstanding loan is paid off more slowly.

3. Take it one step further, we have the interest-only mortgage. All of the payments are interest on none of it principal. The outstanding loan is not paid off at all.

4. The final step is equity release; there are no regular payments and the outstanding loan increases over time until it has swallowed up the entire value of the home. The interest-rate is correspondingly higher.

So, having mucked up by allowing people to move to level 3, they think they can fix things by letting them move to level 4.

Hmm.

Fits in nicely with the Home-Owner-Ist narrative, hard working home-owners with their justly deserved unearned land price gains, for which they clearly never paid, victims of those evil banks (who pumped up their unearned land price gains) being bailed out by those generous insurers, who will ultimately claw it all back again, if not, they'll just be bailed out by the taxpayer.

"New-build homes aren't the answer to rising house prices"

Interesting albeit slightly confused article in This Is Money:

New-build homes make property even more unaffordable, according to research from a leading academic shared exclusively with This is Money.

Every 1 per cent increase in the supply of new homes causes the ratio between an individual's mortgage payments and their income to worsen by 9 per cent.

The finding of Dr Alla Koblyakova, of the real estate economics and investment research group at Nottingham Trent University, dispels the assumption that the supply of new-build properties alone helps to stem unsustainable growth in house prices.

"The Government thinks that by increasing the supply of new homes, the overall cost of owning a property will come down," says Dr Koblyakova, from the university's school of architecture, design and the built environment.

"But this research shows us that the mortgage market behaves differently. When new housing comes on to the market, lenders relax their conditions and lend more money. And when consumers are more able to buy a property for a higher price, the price of property doesn’t come down.

"This is a significant finding and is the opposite of what’s generally expected. It’s important, therefore, that future affordability programmes focus not only on the supply of affordable housing, but also on the supply of housing finance."

The study - based on a sample of more than 1,700 mortgage holders between 2010 and 2014 -considered analysis that homes in the UK were categorised as ‘seriously unaffordable’ last year. The house price to income ratio nationally was 4.6 and 8.5 in Greater London. Affordable housing is graded as 3 or less.

"The main issue that property values in the UK go up faster than wages. It’s not possible for the Government to control house prices. But it is possible for politicians to motivate lenders to offer longer mortgage contracts to reduce the size of monthly mortgage payments. By increasing the duration of a mortgage to 30 years, for instance, it’s possible to make owning a property more affordable for those on average incomes."

There's a lot of confusion between cause and effect here but hey, she's noticed that house prices have been increasing faster than wages. Extending mortgage terms would - using her own correct logic - just push up prices even more so it's not clear why she even suggested it. And of course the government can control house prices, they did it for most of the 20th century, albeit indirectly.

But interesting nonetheless.

Economic Myths: I can remember when mortgage interest rates were 15 per cent...

This is another one which the Baby Boomers like to pull out of the bag, sub-text: todays' first time buyers have never had it so good; high house prices are not a problem etc.

Superficially, the sums are like this:

Nowadays: thirty year mortgage of five time wages, interest rate 3.5%, mortgage repayments incl. principal repayments as % of wages = 25%.

Good old days: twenty-five year mortgage of three times wages, long run average interest rates average 8%, mortgage repayments as % of wages = 25%.

If interest rates nearly double to 15%, superficially you would expect mortgage repayments to nearly double.

Nonsense.

What these people conveniently forget to mention is that inflation was pushing up their wages/eroding their mortgage at a rate of knots.

If you calculate annual mortgage payments as a percentage of inflation-adjusted wages, the picture for somebody who took at a twenty-five year mortgage of three times salary in 1970 is as shown.

In other words, there were a couple of years of pain at the onset, but after ten years, real mortgage payments had halved and after fifteen years they were a laughable 5% of wages:

Homeys in a panic

H/t MBK, a series of increasingly panic stricken Homey propaganda pieces:

Sunday Times, 23 November 2014: Early 50s is ‘too old’ to switch mortgage.

The Times, 25 November 2014: Strict mortgage rules shut out over-40s

Telegraph, 24 November 2014: In your 30s? Why you could be too old to get a mortgage

No doubt by next week they'll be writing that people in their late 20s are "shut out of the mortgage market" or some such nonsense.

Fun with numbers: Outstanding residential mortgages x Standard Variable Rate

We know that total lending has gone up a lot over the last fifteen years (Chart A), but also that interest rates have come down (Chart B). Both of these figures are pretty meaningless; increases in total lending are cancelled out by reductions in interest rates.

The "real" £££ number is the two multiplied together:

Chart C) how much interest the banks can earn, and

Chart D) how much households have to pay in mortgage repayments.

You can draw whichever conclusions you like, but here goes.

Using data downloaded from the Bank of England's Interactive Data page…



The concept of "Standard Variable Rate" is becoming less relevant because of all the introductory teaser fixed rates, but at least there is a consistent series:


If we assume that three-quarters of bank lending to households and businesses is residential mortgages and multiply up by the SVR from Chart B, the total interest charges which banks collect are as follows, apart from the 2007-2008 'blip' just prior to the 'credit crunch':


More relevant is the overall cash flow, i.e. repayments of principal + interest. Assuming a constant remaining term of 20 years, the total annual payments booked by UK banks are as follows; this is the figure which has doubled over the last 15 years:

And yet again!!!

Dear God, will it ever stop?

Mortgage Market Review - Epic Fail by Financial Regulators, Again.

Here.

In other words more subsidy to Buy to Let landlords. Sigh.

Economic myths: Mortgage affordability

Turnbull 2000 in the comments to the previous post:

House prices to average salary is an obsolete benchmark. It has been for a decade.

It's now about monthly affordability. With dual income, 30 year mortgage terms and low interest rates becoming the norm, a couple on 25K each can afford a property of £250,000. I've long expected UK house prices to settle at 6-7x average salary, perhaps 10x in premium areas.

OK, compare and contrast with fifteen years ago:

Nationwide median price paid by first time buyers Q2 2014: £159,804
Assume £15,000 deposit, mortgage repayments on 4% mortgage over 30 years, monthly repayment = £698 per month.
Median household income (guess) = £45,000 gross, so mortgage repayments = 19% of gross.

Nationwide median price paid by first time buyers Q2 1999: £55,618

Let's assume that the median wage has gone up by about half over that period so median income was £30,000, so the deposit which people could have saved up out of earned income was one-third lower and the amount which people could pay off each month was lower.

So £10,000 deposit, mortgage repayments on 6% mortgage over 15 years = £391 per month = 16% of gross £30,000.

So those who bought just in time before house prices went mad could have easily paid off their mortgage by now, the mortgage repayments were lower as a percentage of income to start with and by the end they were very affordable i.e. being nearly £300 a month less than what today's first time buyers have to pay, or only 10% of gross. The savings would be even more than that for a 1999 buyer who took out variable rate mortgages, which most did.

Today's first time buyers are stuck with a higher monthly payment for twice as long, with wages rising more slowly than retail price inflation.

The point is that a doubling in house prices mean that people pay twice as much for their mortgages, whether that's twice as much per month for the same mortgage term, or for a mortgage term which is twice as long is irrelevant. It's two ways of measuring the same thing. Twice as much is twice as much.

(And we don't even know whether Nationwide normalised their price paid figure for the fact that fifteen years ago FTB's were more likely to be buying a house and today they are more likely to be buying a flat.)

Question on pension myths

Dinero asked as follows at Economic Myths: Pensions (various myths):

Are you saying it is a financial error for anyone paying interest on a mortgage to simmultaneously pay into a pension? That seems a bit of a radical statement, not heard that before.

Basic rule of investing is that if you can get a better return on your investment than you pay for borrowing (adjusted for risk etc) then you should leverage up. If your investment returns are lower than the cost of borrowing, you should pay off debt first.

The mortgage interest rate is a fairly known figure; but the overall rate of return you will get on a pension fund, decades in the future, subject to the ravages of fund manager charges, with ever changing tax and regulatory rules etc. is a big unknown. You don't really need to worry about the (future) value of your house when making this comparison as that will be the same whether you pay off your mortgage or not.

So let us phrase the question thusly: would it be a good idea to do mortgage equity withdrawal and pay that money into your pension fund? In financial terms, that is exactly the same as underpaying your mortgage and paying more into your pension fund instead.

That was sort of the idea behind endowment mortgages and it didn't go particularly well (it didn't go that badly either in many cases, if truth be told).

What can possibly go wrong?

Emailed in by MBK, from The Guardian:

A range of Help to Buy mortgages which combine financial assistance from the government with credit card-style "0%" introductory interest rates have been launched by Leeds building society…

The new mortgages from the Leeds are part of the first phase of Help to Buy, which allows buyers to take out a mortgage for as little as 75% of the cost of a new-build property, provided they can manage a 5% deposit, with the government providing an equity loan of up to 20%.

The deals, which are the result a link-up between the building society and home-builder Barratt, include three fixed-rate mortgages with an introductory 0% rate.

A 10-year deal offers borrowers three months at 0% before moving them to a rate of 5.16%, or six months at 0% and then 5.34%; the five-year deal offers three months at 0% and then 4.13%, or six months at 0% and then 4.4%; and the two-year version offers three months at 0% and then 2.88%.