Cullen’s mortgage levy proposal a non-starter

February 9 2007

Cullen’s mortgage levy proposal a non-starter, says leading mortgage broker firm

Finance Minister Michael Cullen’s idea of a levy on mortgages to drive down inflation is unfair and unrealistic, said Rod Templeton, chief executive of Mortgage Link.

Mr Templeton said the levy would target one sector of the population, home-owners, and there must be more equitable ways of achieving the Government’s aim of cooling the property market. It would also be an added burden for those trying to buy their first home in a market where there is a limited supply and significant demand for properties.

“As well, the Government is constantly exhorting people to consider their retirement needs and many people have opted for investment properties in recent times with their retirement in mind. A levy on their mortgage is not going to help retirement planning.”

The idea was raised in a Treasury-Reserve Bank report as a means of gathering extra money from borrowers, the bulk of whom have fixed rate mortgages, which are not affected by Reserve Bank interest rate rises in the short term.

Mr Templeton said it was debatable whether a levy would reduce inflation caused in part by a buoyant property market. “If home-owners have to pay more for their mortgages, they will demand higher wages, while investors will seek to pass on higher costs by raising rents.

“Mortgage Link brokers are working in an industry where we are providing advice for home owners and prospective buyers and we are struggling to work out how this proposal could possibly be effective.”

He said the plan has caused little alarm among clients yet. “Dr Cullen seems to be flying a kite but we doubt that it is one that will get off the ground.”

ENDS

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