Homeowners know the risks of mortgage borrowing – subsidising them sets a dangerous precedent, writes wallaceme 'The Government must not flinch. Mortgages rising in a period of high inflation is not the same as a black swan event like a plague or a war.'
‘The demand for their help on mortgages is only going to grow as rates go up and fixed-term deals time out,’ writes Mark Wallace
In part, that’s because it’s a technical principle from economics and therefore falls into the unfortunate category of things which are extremely important but less than cool. Put simply, if the Government is willing to pick up the bill when we take risks that turn sour, then it skews the calculations when people decide which risks to take. If the downside of an investment or a debt is cushioned by the taxpayer stepping in when you lose, then you have every incentive to make bigger and riskier choices.
We all pay the price of this in both the short and long term. If profits are privatised but losses are nationalised then the many do indeed end up footing an immediate bill for the few. If that principle continues, then the costs and risks mount yet further.
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