1
Nov
The Balloon Goes Up
In the same month that a helium balloon in Colorado made its
famous flight - without its supposed young passenger - the balloon
also went up in the UK regarding mortgage lending, not that this
generated quite so much global publicity. The news that the
Financial Services Authority was to hold banks and other mortgage
lenders responsible for their conduct in providing funds for house
buyers was, however, met at the same time with both partial
agreement and sharp criticism.
Some were pleased
that no one would now be able to borrow beyond their means.
Others were anxious that this would be yet another factor to help
stall the market – along with VAT going up, the Stamp Duty
holiday coming to an end, the general election next year and a new
taste for austerity that might deter buyers from moving up
market.
Some commentators
predicted that the market would go into the dreaded double dip and
there were even those that predicted Armageddon – especially,
like the builders of the Colorado balloon, those that wanted to
seek some extra publicity for themselves.
The reality will
probably be less headline-making. All the above factors may
have a slowing effect on the market. There may be less choice
and this could keep prices artificially high. But even the
most pessimistic headline grabber must agree that the market
shouldn’t return to its position of last year. The
factor that the doomsayers always seem to neglect is human
nature. We are an ambitious species and those in our islands
are an ambitious people. We like to better ourselves.
We like to invest for the future and, if possible, for our
children’s future.
As for the FSA,
not to agree that some sort of onus should be put on the banks to
lend in a responsible manner rather suggests that they should act
irresponsibly. It was irresponsible banks with irresponsible
lending policies that partly got us into all this financial mess in
the first place. As the banks seem to have forgotten how to
demonstrate fiscal responsibility it must surely then be up to
others to ensure they do.
Banks and
building societies telling us what we could and couldn’t
borrow served us well for hundreds of years before the
customers’ financial wellbeing was overtaken by greed.
That we return to those days of responsible banks and lending
should be a comforting frustration for most house buyers, even if
it does mean some may have to save a little longer and the steam
will be taken out of the market for a while.
But the problem
with this new regulation is that it may well go too far. It
will make it harder for the self-employed to obtain a mortgage
without established proof of earnings. This is unhelpful at a
time when we should surely be encouraging brave new initiatives and
entrepreneurs. Those with self-certification mortgages - which made
up 10% of all mortgages agreed in 2007 – will find it harder
to re-mortgage when their fixed terms come to an end. Perhaps
just as importantly first time buyers will certainly have to jump
through a great many more hoops to buy a property than those who
bought over the past twenty years. Cold comfort that their
parents may well have experienced the same difficulties, but they
at least have had the advantage of seeing their bricks and mortar
assets accumulate at an extraordinary rate – albeit with a
couple of glitches on the way.
We are entering a
new era of mortgage lending. It will take a while for things
to settle down but one thing does seem certain: for those with the
funds and the ambition investing in property is still one of the
soundest investments we will make for ourselves and our families,
and that is worth getting the balloons out for.
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