Action needed on mortgages

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From Chris Thomas.

IT was heartening to read on posters around the Island and leaflets which dropped through my letter box that the candidates in the recent elections were brimming with honesty, integrity, intelligence, had a proven track record and were the voice of the people. All stirring stuff!

Having secured their seats in the House none of them seem to be prepared to be measured against their election rhetoric and tackle a major issue which affects a quarter of all those people (voters, no doubt) who have taken out a mortgage in Jersey in the past two to three years, namely the failure of Jersey Home Loans to pass on the recent cuts in the Bank of England interest rates.

I am not so much questioning the legality of JHL’s position (the small print would have taken care of that) but I am seriously questioning the amorality of their decision. I would have fully expected the Islands’ elected representatives and senior decision makers (both political and regulatory) to have taken firmer action by now.

My wife and I took out a two-year discounted variable-rate mortgage just over a year ago. At the turn of this year we were paying the so-called discounted variable rate of 6.30% (Bank of England Base Rate was then 5.50%). At present, with the Bank of England Base Rate some 3.50% lower at just 2.00%, we are still paying the same 6.30% with JHL. Not one penny of the dramatic reductions over the last 12 months has been passed on.

To put this in perspective the average three-bedroom house in Jersey is now estimated at around £500,000. JHL used to lend a maximum of 90% of the property value; therefore an example of a £450,000 mortgage (90% of the average £500,000 home) would be fair. A 3% drop in interest rates would equate to a £1,125 per month saving for this £450,000 interest-only mortgage. All the banks in Jersey (NatWest, RBS, Lloyds TSB, Barclays and HSBC) have passed on most, if not all, of this reduction.

The Prime Minister and Chancellor of the Exchequer are regularly in the media questioning the decisions of banks and lenders and bringing pressure to bear on them for the rate reductions to be passed on to the customer. Alas, in Jersey not a word of protest is uttered by our most senior of politicians. While no lender is under any obligation to do as they are directed by politicians, the media attention in the UK clearly makes it harder for them to hide. Why, then, is this not happening in Jersey?

I am aware that some financial institutions are in a much worse financial situation than others and perhaps to expect the full reduction to be passed on would be too much, but for absolutely none of it to be passed on appears to be nothing short of 21st-century highway robbery. At least when Dick Turpin was robbing and pillaging his way through England he had the decency to wear a mask to try and shield his identity.

Remember, JHL have lent approximately £700m in Jersey. The collective disposable income that would be released through comparative interest-rate cuts proportionate to other mortgage lenders would be significant, not only to the individual households, but also to the Island’s economy.

The Beach House,

Green Island Slip,

St Clement.

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