The news that large mortgages are becoming harder to find for first-time buyers will hardly come as a surprise. According to a new survey, published as part of the Chartered Institute of Housing's UK Housing Review for 2010/11, the number of loans requiring borrowers to find a deposit of 10% or less fell from 245,000 in 2006 to 28,000 in 2009.
In other words, mortgages of 90% or more (including 100% mortgages) are becoming scarcer and scarcer. Instead, on average, first-time buyers need a 30% deposit before they can buy a home.
Yes, this may be bad news for some households hoping to become home owners, but we shouldn't we also applaud banks for resisting the temptation to return to the reckless lending that led to the credit crunch and recession? Personally, I find it incredible that any bank will offer a 100% mortgage following events of recent years.
The solution, surely, is not only to build more homes that can be sold at affordable prices (so bringing down the cost of the deposit), but also to promote private renting at market prices along with intermediate renting by housing associations - both of which are, in fairness, advocated by the CIH.
The problem, of course, is that housing finance depends upon individuals and organisations spending money they don't have - at least in the short term. A few years ago, the government was complaining that housing associations do not 'sweat their assets' enough (in other words, borrow more from private lenders). Within months, as borrowing became riskier, many associations were applauding themselves for not taking the government's advice.
Local authorities would love to become larger borrowers, but the government is reluctant to allow this as it suggests public sector borrowing is out of control.
Until we decide exactly who should be borrowing what (and from whom) it is hard to see how the housing finance system will make much sense to anyone or work effectively to the general good.
No comments:
Post a Comment