|On Tuesday, Paul Tucker, the Bank’s deputy governor, tore up the “hair shirt agenda” that Boris Johnson has accused it of pushing and told the nation: “There’s certainly reason for hope”.
“We shouldn’t get too excited by one quarter,” he said cautiously. But, to his eyes, there is more to it than just an encouraging start to 2013. “Looking over the past year it’s perhaps not as bad as the headline figures suggest,” he went on.
Mr Tucker has always been one of the optimists – he nearly voted for a rate rise in early 2012, before the economy fell back over the cliff. But he’s had a fair wind behind him for the past two weeks.
First quarter GDP was much better than expected, lending conditions are improving for both households and businesses, manufacturing appears to be pulling out of its downward spiral, and exporters claim they are finally breaking through in markets beyond the eurozone.
Some Tories even privately predict that the second half of the year could herald a much more rapid recovery than the meagre 0.6pc official forecast, barring another European calamity – not that one can be ruled out, with the fate of France causing as much concern as the basket cases on the fringes of the eurozone.
Is there a case for optimism? An Office for National Statistics study on Wednesday showed that, on a per-capita basis, the UK has barely recovered any ground lost in the crisis. The gains have been eaten up by an expanding population, which means that — on average — individuals are no better off than in the depths of the recession.
Yet, on the other hand, the UK not only avoided a triple-dip recession, according to last week’s figures, but it may not even have suffered a double-dip recession, the National Institute of Economic and Social Research suggests. Chancellor George Osborne, who has taken an enormous amount of political flak over his stewardship of the economy — from his own backbenchers, as well as his indomitable opposite number, Ed Balls — might have been permitted a wry smile at hearing that news.
“There’s a long way to go,” Mr Tucker cautioned. But the UK is moving in the right direction. In its economic update in a fortnight’s time, the Bank may even lift its growth forecast. Bullish overstates it, but the perma-bears are slowly being slayed.
Mortgage warning too little, too late for some
The banking industry has finally taken steps to defuse the ticking time bomb of interest-only mortgages.
Banks are being instructed by the Financial Conduct Authority to contact borrowers at risk of defaulting on their home loans. Some 600,000 home owners have to repay their mortgages before 2020 and it is estimated that around half of these will be unable to pay back their loans in full.
For more than a decade, banks, building societies and regulators have ignored the fact that more than 1m homeowners have mortgages that they have no means of repaying. No doubt, many borrowers themselves have adopted a similar approach.
After all, this isn’t Mission Impossible and your future financial security isn’t going to self-destruct in 10 seconds. In many cases this detonation point is years away, so what’s the rush?
The problem is that the longer you leave it, the more difficult it becomes to repay the shortfall. Those with a £50,000 interest-only mortgage have a lot of cash to find at the end of the term, if they don’t have an alternative “repayment strategy” in place. Sadly, winning the lottery, banking on an inheritance, or saving into an endowment plan have not proved to be effective options for most homeowners.
But if you still have 10 years left to run on your mortgage, you can switch to a repayment mortgage and start chipping away at this debt. How many take this option remains to be seen, however, given it would significantly increase monthly mortgage costs at a time of squeezed living standards and rising bills.
For many this belated warning is simply too little, too late. Those who have just five years to repair the damage will see mortgage payments (on a £50,000 loan) jump from £125 a month to £898. Those who can’t pay will take their mortgage into their retirement, or be forced to sell up to pay off the loan.
Only a minority of those with interest-only mortgages are currently in this position. But up to 1m could be if they don’t take action now.
This is a good first step, but banks need to do more than just send out warnings. They need to provide clear information on what options home owners now face, so they can avoid their future retirement plans going up in smoke.
Cable continues to display chutzpah writ large
Forget, for a moment, that Vince Cable is Secretary of State for Business. It’s easily done.
Instead, consider the sheer chutzpah of his letter to Lord Wallace, Advocate General for Scotland, which somehow found its way into the hands of newspapers on the same day it was sent.
Referring to the possibility of a prosecution against former RBS chief executive Fred Goodwin – a matter under the jurisdiction of the Procurator Fiscal, as Mr Cable graciously conceded — he nevertheless made his impatience clear.
“I am very keen for a decision to be reached as quickly as possible in order to maintain public confidence in the efficiency of the decision-making process,” he wrote, citing continuing “public and media interest in the banking sector and RBS”.
“I want to be clear that I am not seeking to influence the outcome of this process,” he continued.
Indeed, how can Lord Advocate Frank Mulholland, who on Wednesday remarked that it would be “unfortunate” if this was construed as attempted interference in an independent investigation, possibly have formed such an impression?