As Politcal betting notes with the picture to the right, Gordon brown won the headline war today with his surprise mortgage announcement. "Mortage help" and "middle class" in the same sentece on the Daily Mail and Telegraph will have made him pleased as punch.
Nevermind of course that bankers are briefing that they've been bounced into something they didn't agree with, with one blaming Mandelson saying,
"You can tell Peter Mandelson’s back in town... The press are being briefed before we’ve even been properly consulted."
What surprises me is that the reporting of this has missed the minor flaw which makes it brilliance just another great big sleight of hand con job.
The big fanfare is that eight banks - HBOS, Abbey, Nationwide, Lloyds TSB, Northern Rock, Barclays, Royal Bank of Scotland and HSBC - have signed up to this, although as already mentioned, there are muttering that they've signed bugger all agreements as yet, so it may still fall apart.
What though I am finding astounding is how easily the words of Brown are taken on face value and no one spots the blatent elephant in the room, or alternatively the 'lie'. For example, according to Philip webster of the Times,
Eight big lenders, accounting for 70 per cent of the market, have signed up to the £1 billion plan.
Meanwhile, the
Daily Mail says,
It covers more than 90 per cent of all home loans
The
Scotsman says,
Eight major lenders, responsible for 70 per cent of the UK's mortgage market
And the
Guardianeight lenders had so far signed up to the scheme, including HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays and HSBC. Between them they represent around 70% of the mortgage market.
So we have 70% to 90% of the market share of mortgages. Where did that figure come from? Well that would be the Prime Minister himself who said in the Commons,
The lenders include HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays and HSBC — already 70 per cent. of the mortgages that are held in this country.
The figure of 70% is a "lie". The banks, and by that I mean
all banks, not just these eight, had, as of July 2008, £635,130 million of the £1,214,148 million worth of mortgages held in the UK.
That's 52.2% of mortgages that are from
all the banks in the UK. The other 47.8% belong to Building Societies and specialist mortgage lenders such as building society subsidiaries and securitisations. The last time the banks (and again I mean all bank not just the eight mentioned) held close to that market share was 2002 when they held 69.3% of the market.
Since then the specialist mortgages lenders, which include building society subsidiaries and securitisations, has increased its share to 30.6% whilst the banks have dropped to the already mentioned 52.2%. Even if one is generous and accepts that all 52.2% of mortgages will be covered by Brown's latest plan, that still means just short of half the mortgage holders in the country are not included. Thus the Great Mortgage Insurance Swindle is complete.
Stand up in Parliament, propose a special package for the "middle classes" and throw out a figure that is simply not true. The result is a policy which is not really motivated by the need to protect people, it's about getting the "Brown helps out middle classes" narrative out there and pushing the Damien Green story off the top billing.
I'm not sure which is worse. The fact that Brown stood up and basically threw out a bogus figure about the market share in mortgages of eight banks, or the fact that the papers all seem to have reported it as gospel without checking the figure first. "Rescue deal for a million homeowners" my arse! At best it's probably half that and even then you have to be on interest only with one of eight banks.
UPDATE: Slight correction made. The number of mortgages has been changed to the outstanding value of mortgages in million pounds. Apologies, misread legend on table. Market shares remain correct.
UPDATE II: Noted in the comments that Nationwide is not a bank. Correct, missed it. However their market share was reported by them in Novemebr as falling to 5.6% from 6.2%. That means the overall share of the eight remains at highest 58.8% but more likely lower when other banks come into play. That still remains significantly less than the 70% that Brown claimed in Parliament.
Source: Building Societies Association and Bank of England - September 2008