Government intervention on mortgages will slow down financial recovery

Letter by Richard Wellings in the Daily Telegraph

Sir – The Government has announced measures to make it harder for banks to repossess the homes of those in mortgage arrears.

Yet speedy repossession and sale of properties are essential if banks are to rid themselves of poor-quality assets and build up reserves.

State intervention that hampers this process will slow down the recovery of the financial sector, with negative repercussions for the wider economy.

Another likely effect of the intervention will be to make mortgages more expensive.

If the Government makes it more difficult to collect debts, lenders will demand a greater risk premium.

Mortgages are cheap relative to other forms of borrowing precisely because they are secured on property.

Dr Richard Wellings, Deputy Editorial Director, Institute of Economic Affairs

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