Bunch of fives would help

Chancellor Alistair Darling destroyed the rule book and came out fighting as he delivered his pre-Budget report last week, one of the most significant economic and political announcements for a generation.

But there are gigantic question marks over whether Darling’s 20bn fiscal stimulus will work. What is clear is that the temporary tax cuts announced by the government will bring more pain in the future.

The money being injected into the economy today will have to be paid back tomorrow and that will mean higher taxes for everyone. It’s one heck of a gamble in the midst of what the chancellor calls “economic uncertainty not seen for generations and extraordinary and challenging times for the economy”.

We broadly welcome Darling’s support to boost lending to families and businesses and the moves to make it easier for banks to raise capital.

It’s fast becoming clear that any new lending is going to be government-backed and what better way to deliver this fistful of mortgages than through the intermediary market.

So here’s what Mortgage Strategy proposes the government should offer – a 5% five-year fixed rate for borrowers with 5% deposits, renewable five times and available up to 5 x income. This government-guaranteed product would be one bunch of fives that could help the market.

Of course, the deal wouldn’t be suitable for everyone and not everyone would want it. But brokers could continue to play a valuable role helping consumers make the right choice and that is the fiscal stimulus the mortgage industry wants and needs right now.