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Banks should ease mortgage payment terms to avoid recession, insists MP

Claire Hanna

Banks should offer their mortgage holders easier payment terms to help the UK economy avoid a recession, according to south Belfast SDLP MP Claire Hanna.

In a message to Chancellor Rishi Sunak after his Summer Economic Statement in the House of Commons, Ms Hanna put forward a plan she believes could help with household budgets - and potentially increase consumer spending.

Ms Hanna says banks - particularly those who enjoyed bailouts from the public purse a decade ago - should allow their customers to break from their current mortgages free from early exit fees.

She suggests that customers should then be offered a temporary lower rate mortgage product, say a 1% fixed rate for two years, in acknowledgement that a very low base rate of 0.1% is still leaving plenty of profit margin for the banks.

"I've met with the Treasury Secretary, who has committed to exploring the ideas, and to local banks." Ms Hanna said.

According the SDLP MP, people with a 1% mortgage would save £134 per month, £1,608 per year and £3,216 over two years for the average household in Northern Ireland.

She says her plan would free up additional money that can be spent in the local economy.

"The banks will say that they are currently offering mortgage holidays for those in financial stress but they are only breaks - the capital still needs repaid and interest costs keep building up," she added.

"It is not a populist argument to suggest that looking at the bonuses that banks have paid out in the last few years, combined with the increased closure of local branches and some of the behaviour that led to the financial crash, means that it's time for them to step up to the plate.

"This idea is just one, and yes it has risks and drawbacks, but we should be willing to consider any and every new idea to ensure our society and economy is protected from the biggest challenge we've seen in our lifetimes."

Avoiding a recession should be Government's top priority in the wake of the economic crisis caused by the coronavirus pandemic, the MP said.

"We're running out of words like unprecedented and seismic to describe the impact the last few months have already had on the economy.

"Most respected economists and thinkers are warning that we need to brace ourselves for what is yet to come - a recession that will dwarf that of 2008.

"It could mean really serious hardship for families and businesses across Ireland and the UK.

"The critical thing is that we must do everything possible to prevent a short-term recession turning into a long-term depression - we must keep the show on the road, whatever the cost.

"This means using every and all powers and finance available to the state," she said.

Following her intervention in the House of Commons, Ms Hanna was invited to put her proposals to UK Economy Secretary John Glen.

"He saw the merits of my proposal, and asked for a written submission for his officials to consider.

"They will give me a formal response based on my proposals," she told the Belfast Telegraph last night.

The South Belfast MP said she was now writing to the banks in Northern Ireland to get their response to her plan.

"All it takes is one bank to do it, and there would be substantial moral pressure on all the rest to follow suit," she said.

Belfast Telegraph