Monday 24th September 2012 | 12:14
Institute of Economic Affairs: Scheme to guarantee mortgages with pensions completely flawed
Responding to Nick Clegg's pension-backed mortgage proposals, Philip Booth, Editorial and Programme Director at the Institute of Economic Affairs, said:
"Giving youngsters the ability to guarantee ever-higher levels of mortgage debt using their parents' pensions is no substitute for a properly functioning housing market, with more housing development and lower house prices. We did not get into the current economic situation as a result of there being too few opportunities for people to run up debts guaranteed by others.
"Furthermore, the scheme to encourage youngsters to guarantee their mortgages in this way is likely to be useless and practically flawed. There are relatively few middle-aged people with reasonable levels of private pension in the UK and almost all people with a reasonable level of pension would have a house or other assets on which a child's mortgage could be partially secured if necessary. In addition, pensions are entirely illiquid until retirement. As such, if the government's plans go ahead, a huge amount of extra regulation will be necessary to facilitate this entirely unnecessary scheme."