Instead I'll turn my attention to this. The Financial Services Authority (FSA) is considering banning self-certification mortgages. About time too!! When these 'modern' mortgages were announced a few years ago I said that it would all end in tears. I mean, where is the sense in lending people hundreds of thousands of pounds without them having to prove they can pay it back?
The 'old-fashioned' multipliers were there for a reason. They made sure that you had some money left to live on after paying the mortgage AND made sure you could continue to afford the payments if the interest rates rose. These days people have mortgages that they can barely afford, let alone heat their property and feed themselves. I don't know what they're going to do when interest rates do rise again - and they will. A rise of 0.5% is going to catch a lot of people out and start a whole raft of repossessions. When we got our first mortgage interest rates were about 10%. We asked our advisor to work out what the repayments would be if rates rose to 15%, something he said wouldn't happen. Well it did, and we could still afford it (just).
Look at what has happened to energy and food prices in the last couple of years. Prices have rocketed, beyond what most people (experts and jo public alike) would have expected. It isn't just the traditional poor and/or working class who are having to decide whether to eat or heat their home. This is spreading upwards through the other social classes too. I wonder if this is what Labour meant by 'social mobility'.
More sensible mortgage lending will have a downward impact on house prices as less people can get a mortgage to afford the current silly prices; though there may be an increase in price as less people can afford to move (supply and demand at work). Hopefully, prices will settle to levels that are affordable for our young people.
Let's look at an example. Average starting salaries for graduates are between £20,000 and £25,000 (and assume that those without a degree will have an average start of much less). The average price for a one bedroom shared ownership flat (part buy-part rent) seems to be about £40,000. Owning your flat outright averages at about £100,000. This would be unaffordable to the graduate under the 'three times your salary' rules. The graduate would need a very large deposit AND have some to pay the legal fees. Like I said, prices are probably going to come down until they reach a level that people can sensibly afford.
I'll be honest and admit I have no idea how the part buy-part rent system works. Obviously the total outgoing must be considerably less than the mortgage would be on the true value of the property, but I do wonder how the difference is made up. Rents can only be lower than the mortgage outlay if the money borrowed (by the housing association) to buy the property is much less than it's value.
The rise in the number of properties available by this method shows how unaffordable property has become to vast portions of society. Maybe we should be doing like our continental cousins, where renting is the norm. It's only in the past 50 years or so that owning your own home has been attainable by the vast majority of the population. Before then this was only for the rich. Are we back to this? Do we want to be back to this?
I must admit that, having sampled renting and ownership, I prefer ownership. We can decorate how we want, rip out a fireplace that we don't like (or a kitchen or a bathroom) and, unless we are being repossessed (or compulsorily purchased to make way for a new road), we are not beholden to our landlord's whim as to how long we can stay there. My home is my security blanket (apart from my family, of course). It is here waiting for me when I get back from work. It is somewhere I can shut the door and keep the world out. I can put my feet up and relax. It is comforting, and I'd hate to lose it. That doesn't mean I'll never move from here. Far from it, I have some very definite ideas of where I'd like to live. It's that I am not constantly aware that the next letter from the landlord could be the 'adios' letter. This place is mine for as long as I want it.
Well, this has been a meander through the world of property possession, hasn't it. I hope you followed it.
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