Mortgage bailout would send the wrong message
Julian Jessop appears on BBC Radio 2
“For a start, I think it’s a fantasy to imagine that the costs will be borne purely by the banks – I’m sure they would pass the additional costs onto customers in the form of higher interest rates.
“I’m not sure it’s the right solution to the problem because of what it means for incentives. For a start, the incentives of lenders and borrowers are already aligned, banks don’t want to repossess properties and I think they’d be very keen to offer better terms to borrowers.
“What you’d end up doing instead is sending a terrible signal to borrowers and people more generally, that if you are in trouble, the taxpayer (or the government in some way) will always bail you out. I think that encourages people to take out bigger loans than they can really afford.”
Listen to Julian’s full appearance here (12:16).