The Times, 5 December 2008


As the BBC kept reminding us yesterday, in the run-up to the Bank of England’s rate cut, there are more savers than borrowers in this country. But you certainly wouldn’t know it from the way the government chooses to behave. Interest rates are now 2%, the lowest they’ve been in a lifetime. Banks will be forced to pass this on to their customers. It’s supposed to be a good thing, and, for borrowers, it probably is. For savers, however, it’s a lot like being kicked in the face by someone whose job you’ve propped up for a decade. Mortgage interest deferrals for two years, interest rates cut to 57 year low, a promise of help for second mortgages in the Pre-Budget Report, are all being underwritten by the tax-payer.

But here’s the thing: I’ve spent ten years saving for a deposit on a flat. Every year, I’ve earned more than the year before. But every year the flat spun further out of my reach, as Labour presided over one of the most destructive asset bubbles in history. Being more prudent than it now transpires anyone in the government has ever been, I didn’t falsify my earnings to get a mortgage I couldn’t service on an over-priced, peanut-sized property I couldn’t afford. I just kept paying the rent, hoping that the inevitable crash would hurry up.

And now I’m supposed to watch my taxes being used to bail out people who were stupid or greedy enough to assume that the ‘WARNING: Your home is at risk of repossession if you do not keep up repayments on it’ didn’t apply to them. Turns out they were absolutely right. Which is unfortunate, because for hundreds of thousands of people in their 20s and early 30s, who want to stop haemorrhaging thousands of pounds a year in rent, buying a repossessed property at auction (assuming we still have an income next year), was pretty much our only hope. But at least we’ll be able to guarantee someone else’s second mortgage.

Every time Gordon Brown declares how important it is for hard-working families to keep their homes, I slightly want to scream. It must be awful to be kicked out of your repossessed home. It’s also awful being booted out of a rented flat with four weeks’ notice. Ask a tenant how many months’ arrears they can build up before they’re out on the street, and repossession-happy Northern Rock suddenly starts to look positively cuddly.

Still, at least my deposit is safe in the bank, right? Well, it’s now earning almost no interest at all, while inflation stands at 4.6%. The government may fear deflation, but pensioners living off their savings, and putative first-time buyers like me are banking on it.