It is a relief to see someone talking sense about loans and personal finance. At long last the government is to ban the insidious practice of offering home buyers a 100% against the value of their house.Unbelievably during the recent housing boom the banks did not protect themselves from a possible collapse in the market by asking potential buyers to put down a deposit. In fact on some occasions they even offered potential buyers mortgages of 110 or even 120% of the value of their dream home.
When the market is on the rise, I suppose it isn't a problem. If a house is worth £100,000 and is mortgaged for the same amount it doesn't matter as the value of the house will increase. When its worth £120,000 there's nice margin of equity.
However if the value of the house then sinks to £80,000 we get negative equity which means that if the bank has to foreclose someone is £20,000 out of pocket.
Taking on a mortgage is a big commitment and a decision that shouldn't be taken lightly. It doesn't do potential home buyers any harm to have to pull a deposit together. It means regular savings and an understanding that things such as ownership don't come easily.
The problem in recent years is that the our wider economy has become alarmingly dependent on the housing market and this brings inherent dangers as I spelt on this blog out nearly 12 months ago.
Housebuilding need no be dependent on vulnerable individuals taking out impossible to repay loans in the quest for a roof over their head. We need to look at "social housing" - even the much derided "council housing" that took care of me as a child - and build more homes for affordable rents.
The recipients of such homes will still be able to furnish and decorate their homes, the house builders will be able to buy the bricks and piping. The economy will be stimulated without asking people to take on horrendous risks, and at the end of the process the wider community will have an asset and income from rent
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4 comments:
Having worked in and social housing and lived in it all my life I whole heartedly agree with what you are suggesting here.
It is a reality that there are many thousands of people in need of housing in almost every large town in the country and a chart was published recently in the Express and Star giving the number for the five Black Country boroughs and the figures were quite staggering. In Walsall alone there were in excess of 10,000 people/families on the waiting list.
I believe another matter that needs addressing in the area of housing is the large number of empty homes belonging to private owners/landlords. There is a house round the corner from me (a former council house) which has been empty now for a least ten years and as you can imagine has been in various states of repair during this time. It is a three bedroom property that would make an ideal home for a family.
I think that one of the problems that I have seen is that successive governments during the last 25 years have seemed to treat housing as a poor relation. Perhaps the current government may do better but I will not hold my breath.
Hi David,
If you've got half an hour to spare listen again to the excellent BBC broadcast of Thursday 26 February on the subject of social housing: Analysis - Anti Social Housing.
You can catch it again on BBC iPlayer. It's available until Sunday 8 March 2009.
Regards, Declan
I heard the repeat - excellent programme and one worth listening to as suggested by Declan
House price inflation undermines our economic performance and the competitiveness of business in the global market place. House price inflation reduces the standard of living of people because they have to find more to pay for a home. They can also afford to buy less goods that dents demand for products.
Its time to look the other side of recession and bring in regulation to control the housing market prices both rented and mortgaged-otherwise it will lead straight back where we are after a few years of boom!
The system of creating housing shortages and to ensure you slave all your life for the mortgage or rents is one great big con trick and people have fallen for this for years and years. By the time you pay the mortgage off the house might be slipping and eroding into the coast, or it was marshland many years ago and the place disintegrates due to rising water.
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