Squeezing the middle till it hurts
Saturday 17th November 2012, 2:00PM GMT.
NEWS that Treasury wants to scrap mortgage interest relief will come as a hammer blow to many struggling homeowners.
The minister, delivering his first Budget report, justified the decision by saying the relief was a subsidy for paying a mortgage, paid for by taxpayers as a whole.
That may be so, but the people who will be hit hardest are the working population who have scrimped and saved, skipped holidays and gone without in order to get a fingernail on the housing ladder.
They may never have claimed benefits nor received any direct financial support.
As such, this is an attack on low- and middle-income earners who ask for very little – and receive even less – from the States.
And it comes at a time when the States has not fulfilled the promises it made to taxpayers with regard to getting its own finances in order.
What happened to the pledge not to hit islanders in the pocket until the States had delivered the agreed savings under the Financial Transformation Programme?
The minister talks about fairness – or lack thereof – with regard to the current system, as those renting or in social housing don’t benefit from mortgage relief.
While that’s true – although one could argue social housing tenants also benefit from a taxpayer-funded subsidy – mortgage relief is available to anyone who gets on the housing ladder.
The department also suggests the move is likely to lower house prices, helping first-time buyers. His rationale is that mortgage providers lend more because homeowners can afford to pay more, as a result of receiving mortgage relief. Take this away, he argues, and banks will lend less.
The fear is that Treasury’s plan will backfire. It could lead to lenders making it harder for first-time buyers to get a mortgage, while prices are maintained by wealthy cash buyers who would rather invest in bricks and mortar than stocks and shares.
If that happens, large numbers of islanders can give up on the dream of owning their own home.