ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN: Now then, mortgages would rise by nearly £1000 a year if the UK leaves the EU, that’s the warning from the Prime Minister this morning. The short term uncertainty of leaving the union would lead to tighter credit conditions and fuel a rise in interest rates according to the Remain camp.  Well Jayne-Anne Gadhia is the Chief Executive of Virgin Money and she joins me now from Edinburgh, a very good morning to you.  Isn’t this more scaremongering, shouldn’t you be saying interest rates might rise and mortgages might go up?  

JAYNE-ANNE GADHIA: Hello Dermot.  Well from my point of view I’ve been worrying about this particular issue for a number of weeks now as I’ve been thinking about the EU referendum because let’s face it, mortgage rates at the moment are at such a low, people have got a lot of ability to buy houses and have disposable income to generate a really good quality of life as a result.  Any risk to that I think is bad for our economy, our society, mortgage customers, house owners and my customers, I want to look after them.  Now the numbers that have come out this morning from the Prime Minister, I haven’t done all of the detailed analysis around the specific numbers but I think the numbers he’s talking about suggest that mortgage rates might rise by between half a percent and one percent or around £75 a month to people in the UK.  Now that doesn’t seem crazy to me.  At the moment what are average mortgage rates?  About 2.5% a year, very, very low.  If we were to say that they could go up to 3% or 3.5% as a result of a Leave vote I would say that that is not at all scaremongering, I’d say that’s perfectly reasonable not least because a Leave vote, even the Leave team say it would increase unemployment and as a consequence a more uncertain economy is bound to lead to an increase in mortgage rates.  

DM: Just on those rates that you know an awful lot about of course, you did use the word might rise but you know, as we all do, that interest rates are not just dependent or even dependent on whether Britain leaves or stays in the European Union, they are primarily to deal with inflation and that’s at record lows at the moment and the Governor of the Bank of England has told us he also looks at other variables such as employment.

JAYNE-ANNE GADHIA: Well I think the point for me really is that mortgage rates could go up with an EU exit vote even if bank base rates do not go up and that’s why people need to think very, very hard about it.  The reason for that is that mortgage pricing is set by two additional factors as well as a bank base rate. The first is what’s the level of unemployment in the economy because of course the more unemployment there is, the more risk there is to the repayment of mortgages and that puts prices up and even the Leave campaign have said that in the short to medium term unemployment would go up, so there’s one fact that would give rise to an increase in mortgage rates regardless of the base rate.  

DM: But what about this … ?

JAYNE-ANNE GADHIA: The second thing that’s important is that funding costs for banks would go up because we wouldn’t have the same access to funding as we do today. So both of those things say to me that mortgage rates will rise regardless of interest rates.  

DM: And what about this claim, and it’s been made for some time by the Chancellor and it’s been made again today, that house prices might fall.  A lot of people would say, well given the prices that are being hit now, that would be a good thing.  

JAYNE-ANNE GADHIA: I think that house prices have done very well and I do think that house prices are a really good factor of a strong economy.  My own view is that it is likely that house prices, particularly in London and the South East, are likely to fall as a result of a vote to the EU not least because …

DM: And make them more affordable then.

JAYNE-ANNE GADHIA: … European investment in the UK would be reduced. Well it would be great for some people but of course those people who are already sitting on mortgages on their homes are unlikely to want to see house prices come down, we definitely don’t want to get back to a place where – and we’ve seen this before don’t forget, this isn’t scaremongering this is something that’s happened in the history of our economy that mortgage rates go up and house values come down.  That means that people get trapped in a spiral of negative equity which is no good for anyone because it reduces their ability to spend in the wider economy and I think we should avoid that for our customers and our society, not just at all costs but because we’ve got it today.  We live in a healthy economy with good house prices, strong mortgage rates and an access to mortgage lending that is second to none and I really want the UK public to be able to benefit from that in the years ahead with certainty.

DM: I know you’ve got some specific thoughts on women, women in finance of course the neck of the woods you’re in but have you got any thoughts on how women it appears, and there is research on this, women in particular seem to be alienated by both sides in this campaign.  

JAYNE-ANNE GADHIA: Well I think that for me, when I did the review that we recently published into, as you say, women in finance, the thing that women dislike is the I win, you lose alpha male culture and I can absolutely see that coming through in this referendum, he said this, she said that, we disagree with each other.  What I think women and all people want are the facts and the fact for me in this referendum isn’t about all of the very important peripheral points, it’s squarely about the economy and I think we should make that point to everyone that a vote to leave the EU on the 23rd June is a vote to leave a trading block with 500 million people, where 44% of British exports go.  That inevitably is going to put up prices whether that’s mortgage rates or other rates, it’s going to reduce employment and we’ve got such high employment at the moment, why would we do that?  You mentioned Mark Carney earlier, I think he pointed out very objectively that it would give rise to an economic shock so I think for women and men everywhere I would say focus on the economy.  It’s good and it’s strong, let’s make it better and stronger inside the EU with certainty, not outside with all of the uncertainty that that brings.  

DM: But that economic shock that you and others predict, are you talking your own book here because I know that Virgin Money has been lending a lot of money on housing recently and there are those that are saying that another bubble is building up and this would prick it with dire effects on organisations like your own?

JAYNE-ANNE GADHIA: Oh I have to say that from Virgin Money’s perspective, we certainly have never felt ourselves as part of the Establishment, we are very much a challenger bank growing to give customers a great deal through being a trusted bank and that is why I am so passionate about helping our customers see the issues ahead around the EU referendum but to the extent that you’re talking about the financial crises of the past, or the most recent financial crisis, of course we saw that the big banks did get themselves into trouble. They are big and they are complicated and as a result all of the regulation and capital requirements that have been put around those banks have made them much safer and much more secure and as a consequence, as I say, they have become part of a stable and thriving economy.  Let’s not risk that in the way that you, Dermot, have just implied that by creating more uncertainty during a Leave vote and as a result again destabilising the financial system.  That would be bad for everyone.

DM: Ms Gadhia, thank you very much indeed.  Jayne-Anne Gadhia there, Chief Exec of Virgin Money.