A New Stimulus: Quantitatively ease my mortgage

As we are coming up to budget time and the UK economy continues to go to hell in a hand cart, I thought I would take a little time out to help Chancellor of the Exchequer, Gideon Osborne, get the economy going again while simultaneously winning some votes. I’m not going to list all the economic leavers, or opine on the theory of fiscal and monetary policy. 


I am suggesting just one way to put money in the pockets of families that will make a significant contribution to increasing aggregate demand and getting our economy moving again.

It’s a kind of quantitative easing that will not just work, but actually feel like it’s working.

A large number of my colleagues were just told they are likely to be laid off. As relieved as I am not to be directly impacted, I was laid off in December 2009 and also faced something similar about 18 months before that. But despite this, like many other white collar middle class homeowners I have done everything I can to make sure my mortgage is paid. We have sold our second car and settled for short, domestic holidays. We have scaled back every utility and every luxury. We don’t go out, we and we make do and mend.

While my gross salary has remained static since 2008, I estimate my net salary as reduced by around 12% in real terms. We have lost our family allowance and we have paid our increased direct and indirect taxes. Our credit rating is intact and we continue to be net contributors to the exchequer.

So now it’s time for our payback, and it won’t cost the Government a penny. The mortgage I have worked so hard to cover is provided by RBS. The bank that the Government holds around 80% of the shares on my behalf.  I have a fixed rate mortgage at around 5% because when we took it out we were curiously optimistic about the economy and thought interest rates could rise. I know, not the best decision with hindsight. If we were on the bank’s tracker rate we could be saving around £300 per month.

That’s around £7,000 per annum in gross salary we could have made available to us. However, to access this deal I would have to pay more than that in penalties. Now RBS and the other virtually nationalised bank, Lloyds HBOS, represent about 40% of the UK mortgage market. So imagine the aggregate demand that could be generated if people like me could simply remortgage, keeping the same term, but at a lower interest rate and without the penalties?

Now I’m not completely naïve, I know there are counterparties to my mortgage holding bonds etcetera. But it strikes me that buying their paper is a wholly more popular and real use for the £50 billion the Bank of England has just spunked on buying back Government debt form pension funds that they call quantitative easing.

And it doesn’t have to stop with these two banks. If the Government hadn’t shored these institutions up Barclays and HSBC would have gone the same way. I can’t think of a better way to offset the unpopularity of the bonuses of all banks than by rewarding those people that have done everything they can to keep their heads above water in one of the toughest economic environments for several generations.

Executive Pay Addiction

Smokers like to point to the calming effects of smoking, relaxing after long day with a drink and a drag - the satisfying puff after a lovely meal. But they also like to draw attention to the charging effect of smoking, how when driving long journey or fighting jet lag a smoke will help to generate some energy.

Until a friend of mine, a frequent ex smoker, drew my attention to how untenable this position is; I had not realised that my habit was not a useful habit with some risky side effects that will never catch up with me, but an addiction. Of course, with hindsight, it is ludicrous to think that an artificial stimulant can also work as some kind of calming influence. It’s just an addiction.

The first step in dealing with smoking addiction, for me, was to choose to fight it. Of course I had some great incentives, a new family and loving wife, but at the end of the day I had to choose to do it for myself. Part of that process of choosing to fight the addiction meant deconstructing the arguments for smoking. And the first one was, this drug does not solve anything, least of all the effects of stress or tiredness.

Those in our community that deny executive pay is excessive invoke ‘the global market.’ And why not, what could have a nicer ring to it than the market itself, and global one at that. After all, two-thirds of FTSE 100 companies are global operations, for whom the UK is a small part of their operation.  However, these same people also use the global market as the same reason why low wages are very low and high wages are disproportionately high. 

How can one overriding factor drive leaders of our largest organisations to have salaries 40, 50, 60 even 100 times higher than the lowest in their organisations, while simultaneously driving the gap between the two wider?

The same reason 10 million people smoke in the UK – addiction.

Going Social

“New technology doesn’t change the way our brains work. Social networks are not new. For thousands of years, people have formed into groups, built strong and weal relationships, formed allegiances and spread rumour and gossip.” 

Paul Adams, former Google designer that created Circles in Google Plus.

As technology evolves, so do the communication tools we can use, but our behaviour remains the same. Consider the introduction and the role today of the pager, fax machine, text messaging and email. 

We once lived happily without any of these tools, then they became essential, and now we live quite happily without the first two and the last two are in decline. But we are still communicating. 

Sharing ideas, opinions, good news and bad. Share tips and football transfer news, arranging meetings and seeking forgiveness for being late.

So what does it take to go social? Nothing. You’re doing it.

You are already doing all the things that constitute going social, all you need now are some new tools. Twitter, Linked In etc., pick them up and use them. And how do you learn how to use them? Just the same way you learned how to behave at a dinner party, football match, nightclub: You watch what everyone else is doing. You watch, you listen and when you have something to say, you say it.

What could be simpler? Even my Mum's doing it.

Being Social

Social networks haven’t grown exponentially just because people enjoy the warm and fuzzy social interaction that leads them to think oh I can spend hours doing this. The fact is they bring their friends, family, colleagues and clients together because the information created in social networks is extremely important and valuable.

In a previous blogs, My wife is the Typical Facebook User, I argued that my wife’s killer App was the NCT Nappy Locator. This app allowed her access to valuable, time sensitive, location specific information on where to change our daughter’s nappy.  This incredibly powerful tool was available for free, in return for simply adding her views to the greater discussion.  And that’s ‘being social.’

If we don’t have access to the information held in social networks, we are less valuable as an information source in our own right. We collect information such as who knows whom, a politician’s comment on a news article alongside views of hundreds of readers just like us, a personal blog from someone that does the same job as us for a competitor, a personal blog by a client on something that is important to them, and we add to it. We add our own perspective that is informed by what we have collated and we decide how to use it.

Detractors of Trip Advisor (as seen on Channel 4 in the Uk the other night) argue that its system is faulty, mainly the part about letting everyone add their comments without more robust validation. But because we can see every review that person has posted (and maybe their Facebook profile if they allow us to); we can make our own mind up whether we value their opinion. Do they appear to moan about everything, or does this post appear to be a genuine gripe. We decide, not the hotel. And the insight is valuable, not just because of it’s independence of the vendor, but because we can add our own perspective and correct it if our experience differs. And that’s ‘being social.’

And the price to access all of the information that we can add our own unique perspective too? Be social and engage in it.