Financial News

[andrewducker]

The EU want to make it much easier to take out mortgages across borders - so, for instance, I could take out a mortgage with a bank in France. As the EU interest rate is a couple of points below the UK one I suspect many people would instantly switch their mortgages over to euros rather than pounds. Which would put us straight back into a hugely rising property market and effectively take control of interest rates out of the Bank of England's hands. It would thereby effectively remove the major reason or not joining the Euro - i.e. control over our own currency.

Interesting manouver. I wonder if they'll get away with it.

Comments

[andrewducker]

I don't understand your second paragraph there - interest rates aren't set by the markets - they're set by the central banks.

And the primary purpouse of interest rates isn't mortgage repayments, but they certainly take them into account, and an awful lot of government spin has gone into talking about interest rates and their effect on house prices and it most definitely seems to be taken into account during their deliberations.

[drplokta]

Interest rates aren't set by markets, but exchange rates are. I probably should have said that if UK interest rates are 5% and euro rates are 3%, the pound will go to a level against the euro such that it can be expected to depreciate by 2% over a year.