No pound would ease mortgage costs

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Johann Lamont’s dire warnings on mortgage costs in an independent Scotland (your report, 11 August) do leave me “feart”, but perhaps not in the way that she hopes.

Her warning is, first 
and foremost, economically illogical. Interest rates faced by different countries depend primarily on one key consideration: namely, the perceived risk that the capital and interest might not be paid back as agreed.

Yet Ms Lamont claims that if an independent Scotland is denied a currency union and is forced to use sterling informally, without taking on its share of UK debt, it will face punitive borrowing costs.

The opposite is likely to be the case. Under such a scenario, Scotland would start its life as an independent country with zero debt and without having to pay around £5 billion per year in debt interest repayments.

Its fiscal position would therefore be substantially stronger both on an annual basis and in terms of it not carrying a huge existing burden of accumulated debt.

To use a household analogy, it would be akin to starting off home ownership in a mortgage-free position: without monthly payments, and without a mortgage to pay off over the long-term.

This would mean Scotland’s need to borrow would be minimal (it might run a fiscal surplus in good years).

It would also make it an extremely secure country to which to lend, should any borrowing be required. This would point to a strong credit rating and low interest rates.

Perversely, this unfair, advantageous position is not the preferred outcome of those on the Yes side of the debate. It would only come to pass if the rUK parties followed through on their threats to block a currency union.

There is also no evidence within the markets to suggest that countries of Scotland’s size suffer in the debt markets.

Not only do the “usual suspects” (eg Ireland, Norway, Finland, Sweden, Denmark, Netherlands, Switzerland and Austria) have substantially cheaper borrowing costs than the UK, but others such as Czech Republic, Latvia and Lithuania fare as well or slightly better than the “mighty” UK too.

So I am feart, but not for my mortgage. I regret the level of negativity to which one side of our debate has stooped. That makes me fear a No vote most of all.

C HEGARTY

Glenorchy Road

North Berwick

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