How the model works
The tool models the re-capture of savings from a bond-based, borrower-owned mortgage reform, following the bond-funded model proven across several continental northern European countries (similar – but not identical – systems exist in the Netherlands, Germany, Sweden and Finland). All key figures are editable inputs – decision-makers at Treasury and Downing Street can adjust any assumption to their own judgement and see the results change in real time.
Three independent benefit streams are computed over a user-set political horizon (years + months):
- Households – the gap between the standard bank mortgage rate and the bond-based rate, applied to the average outstanding mortgage, across converting homes.
- State – debt-cost – a conservative "credibility gain" on the UK's ~£2.7tn public-sector net debt from a deeper, AAA-grade fixed-income ecosystem.
- State – tax, benefits & land – VAT and income-tax/NIC recapture of re-spent household income; reduced social-benefit cost per converting home; and a captured share of land-value uplift.
The state's captured revenue then splits (user-tunable) between green infrastructure / NHS and state debt reduction.
Default inputs & sources
Defaults are deliberately conservative starting points and must be updated to current official data before external use.
| Input | Default | Basis / source |
|---|---|---|
| Bond-based mortgage rate | 4.0% | Conservative opening value; continental northern European covered-bond pricing is typically below standard bank rates |
| Current bank mortgage rate | 4.9% | Bank of England base rate held at 3.75% (Jul 2026); typical 2–5yr fixed rates 4.5–5% |
| Average outstanding mortgage | £165k | Bank of England / NimbleFins ~£163,098 (Dec 2025); new-mortgage avg ~£205k (Q1 2026) |
| UK mortgage stock | 8.5m | UK Finance: 8,501,000 residential mortgages outstanding; £1,746bn total (BoE 2026 Q1) |
| Reprice / conversion cycle | 3 yr | Typical UK mortgage repricing every 2–5 years |
| Time to pass legislation | 0.5 yr | User-estimate: enabling act through both chambers in ~6 months |
| Gilt credibility gain | 25 bps | Illustrative, deliberately conservative; tunable |
| Benefit saving / home | £2,400/yr | Illustrative average of reduced unemployment/housing benefit; tunable |
| VAT / income-tax recapture | 20% / 33% | UK standard VAT 20%; combined marginal income tax + NIC ~30–35% |
| Land-value uplift & share | £12k / 30% | Illustrative; the state's capture of land-value uplift on released land |
All illustrative parameters are flagged as such and are fully editable in the model.
Deliberately excluded from the headline
The model does not claim that UK gilts become structurally cheaper solely because of mortgage bonds. Sovereign yields are driven primarily by inflation expectations, monetary policy, fiscal credibility and currency risk. The credibility gain input captures the modest, defensible contribution from a strengthened fixed-income ecosystem – and it is tunable to zero if the user judges it nil.
Direct sources
- Bank of England – Quoted household interest rates; Mortgage Lenders & Administrators Statistics (2026 Q1: £1,746.1bn outstanding, +0.7% q/q).
- UK Finance – 8,501,000 residential mortgages outstanding.
- NimbleFins / BoE data – average outstanding mortgage ~£163,098 (Dec 2025); new mortgage avg £205,298 (Q1 2026).
- Bank of England – base rate 3.75% (30 July 2026 hold).
Illustrative modelling for policy discussion. Not financial advice; not an OBR or HMT product. Figures should be verified against current official data before any external use. This tool does not constitute an offer or commitment.