1. mark said...

If house prices had been lower, people would have paid less on monthly payments, then they would have been able to save for the bad times....

3. mark wadsworth said...

Mark, exactly.

If Labour hadn't taken Home-Owner-Ism to extremes, our recent purchasers would not be paying a subsidised 4% interest on a typical £120,000 mortgage, they would be paying 6% on a £60,000 mortgage (assuming same size deposit and greater capital repayments in the interim etc). They'd only be £100 a month better off in terms of mortgage repayments, but all the money that has been diverted into the bubble would have gone as savings into the bank and hence as investment into businesses, so there would be far less job insecurity.

As we well know, if you lose your job you are likely to lose your home - so if it is people losing their homes that we worry about, we should worry about the cause - job security (i.e. a stable and growing economy) first, and then there'll be no need to worry about or treat the symptoms - i.e. bailing out people who have overborrowed and/or lost their jobs.

Mr F, sure, old fogeys like you or me like to preach sensible money management, and when I bought my house in 1998 I scraped together a 20% deposit and decided to fix my mortgage rate for ten years and pay it off over eleven years (which I duly did). Had the sh1t hit the fan, my wife and I would always have been able to scrape together enough money to pay off the £830 a month mortgage, or worst case, extend the period and take the penalty on the chin.

But these options are no longer available to young people, it's either stay renting or "jump on the ladder" and there is a lot of social or political pressure to do the latter.

7. easybetman said...

A few weeks bank of BBC Panaroma (something like how to deal with the bank) a chap basically blaming the bank not lending to him at 90% or that the surveyor gave him a low valuation of the property after he managed to 'negotiate 25% of asking price' and the bank is not doing its social duty to 'allow people to buy a home'.

It seemed that there are a good numbers of people will think that the bank should lend them as much as they would like to have and when they get into trouble, then they blame the bank for being nasty. Singapore/HK has a 20% down legal requirement and many of the british public still think 90% mortgage is a birth right (until they can't pay it, then government assistant is the birth right)

9. mr g said...

@TT "Sometimes the old ways are the best."

Of course they are.

When we were buying our first house in 1972 we applied to the then Halifax Building Society for a 90% mortgage, having saved the 10% deposit with the Halifax. Even though we were both in full time employment and were applying for a mortgage which was less than 2 times our combined income, we were refused, although Abbey National did agree to lend us the required amount at the end of the day.

We eventually moved to a larger house as the kids got older, (a modest 3 bed semi not a 6 bed detached with a paddock, before I get a tirade of cr*p from certain people) and took on a larger mortgage although this was still less than 3 x income. Whilst paying the new mortgage I experienced 2 spells of unemployment totalling 15 months due to redundancy yet we still met our obligations through careful financial management and finally paid off the mortgage 3 years early.

Apologies for the history lesson but the point is that both parties in this example, the banks and ourselves were prudent which should now be the norm in order to restore sanity to the housing market.