§ Mr. George Cunningham
asked the Chancellor of the Exchequer what is his estimate of the effect on the retail price index of the increase in net outgoings on repayment mortgages if the Government's proposals for altering the method of giving tax relief are implemented in the manner announced by the Building Societies Association, that is by the adoption of constant net payment by borrowers.
§ Mr. Ridley
There will be no direct effect on the index as a result of the proposals for altering the method of giving tax relief. The retail prices index takes account only to the interest component of mortgage repayments. However, the interest payments would be reduced by a switch to constant net repayments, after the first year, as capital would be repaid more quickly. The RPI would reflect such a change, but the reduction is likely to be very small—probably less than 0.1 per cent.