i have said this since 2008 and still don't see why it won't work...

The_White_Horse

the Govt should create a law that states that all people who took out a mortgage from 2000 onwards should pay it back at 1% interest.

the requirement being it must be a repayment mortgage.

a) many people will get more money in their pocket to spend to kick start economy

b) the banks get their money back plus a small amount of interest

c) the problem of thousands of interest only loans evaporates.

win, win, win.

Graham_Devon

....with double doses of moral hazard as a sweetener!

somethingcorporate

The banks borrowed money from other banks and institutions at far higher rates than 1% when they gave mortgages out. They'd make huge losses.

The_White_Horse

so? the banks were bailed out for billions, so they can suck it up.

chewmylegoff

The_White_Horse wrote: »

the Govt should create a law that states that all people who took out a mortgage from 2000 onwards should pay it back at 1% interest.

the requirement being it must be a repayment mortgage.

a) many people will get more money in their pocket to spend to kick start economy

b) the banks get their money back plus a small amount of interest

c) the problem of thousands of interest only loans evaporates.

win, win, win.

the reason it wouldn't work is that the cost of capital for a bank is far more than 1%, thus it would make the last 12 years mortgage lending hugely unprofitable, probably resulting in the govt having to bail the banks out again. that's the only problem. otherwise a brilliant idea...

ILW

Or alternatively, make a law that savers get at least 10% interest. That would also put money into the economy and at least reward the prudent rather than the !!!!less.

somethingcorporate

The_White_Horse wrote: »

so? the banks were bailed out for billions, so they can suck it up.

I just showed why your idea wouldn't work.

You cannot just then say they have to deal with it, it is a showstopper as they'd need more bailouts.

Loughton_Monkey

You simply must enter your idea for a Nobel Memorial Prize in Economic Sciences.

Here's the address.

The Nobel Foundation
Sturegatan 14
11436 Stockholm

The_White_Horse

i'd like to see the maths before accepting these claims. also, how much would they get back from turning interest only into capital repayment?

purch

The_White_Horse wrote: »

the Govt should create a law that states

In the National Socialist utopia you crave for that might be an option, but in the country that we live in, Governments do not and cannot operate in that way.

The_White_Horse

yes they can.