As Britain emerges from the mire of the financial crisis catalysed by 2008’s banking crash and one of the worst recessions in living memory, the general public need to understand what measures the government and its various institutions have employed in order to put the United Kingdom in a position of recovery.
One of the most crucial tools available to any government, which retains monetary sovereignty, is the ability to set its own interest rates. The UK’s government does this through the Bank of England, and the particular collective responsible for this is the Monetary Policy Committee. This committee meets twice a month with the primary function of aiming to attain a consistent level of inflation, set by the government at 2%. The present rate of inflation is 0.5% according to the Bank of England – a record low. When the interest rate is expected to be lower than the target of 2% the Bank employs tactics such as cutting interest rates, stimulate borrowing and other mechanisms designed to facilitate spending and job creation.
These mechanisms have an effect on the ways in which building societies and high street banks will charge for mortgages and loans. Because inflation can change, a lot of people find the idea of ‘tracker mortgages’ very appealing. A tracker mortgage follows the base interest rate set by the Bank of England which allows you to overpay at times when this falls, allowing someone with such a mortgage to pay it off more quickly. Usually the tracker facility will only be available for a fixed period of time.
The government is aiming to influence the economy through property is the ‘Help to Buy’ scheme. The main function of this scheme is to allow first-time buyers a greater opportunity to raise the deposit for their first home in what are usually lower loan-to-value mortgages. If you are putting down a smaller amount for a deposit then it is unlikely that you will be able to get a good value loan, 5% of a property’s value for example, isn’t secure enough for a bank to loan money at a low rate.
‘Shared ownership schemes’, where a buyer pays a certain value of the property (usually between 25% and 75%) and then pays rent on the remaining value also makes home ownership more accessible. These are provided through housing associations, and have certain eligibility criteria. They are particularly applicable to older people; you have access to a different scheme if you are over 55.
The Older People’s Shared Ownership Scheme only requires someone to pay for 75% of the value of their property, after which time there will be no requirement to pay rent on outstanding amount.