It would be nice, just once, to come into the office and see some genuinely positive news in the housing market. Sadly, this week the press and all the feeds of PR have failed again to come up with any real stories that could have a positive impact.
Instead – the feeds and screens are glowing with yet more waffle and advertorials from the usual suspects (i.e. banks, politicians, estate agents and mortgage providers).
Top Bathtub Thinker Grant Shapps was one of the first in line to spread the word that he was "delighted" about another lender jumping on the high LTV mortgage bandwagon that has once again rolled into town amid the dog and pony show that is the NewBuy Guarantee Scheme.
It would seem Mr Shapps and his fellow gymnologists in the housing industry believe that being able to buy a house is still more important than being able to actually afford it. In addition, it should be noted that they also appear to be of the belief that buying a property with other peoples money when prices are falling and the economy is weakening is a good idea.
Still, as long as Grant Shapps is "delighted" I'm sure it will all work out.
The second (although related) annoyance this week is the speed with which certain lenders have jumped on the bandwagon side-car with shiny new banking products like "Save to Buy" to entrap the first-time buyer.
Whilst on the face of it this might sound like a reasonable ploy for all in that it generates cash for the banks and offers an "opportunity" for FTB's to get on the ladder as it were – it, like most new fangled mortgage products - falls over at the smallest of the first hurdles.
As much as the concept of encouraging people to save a fixed regular amount and offering them a mortgage as a carrot to do so is a good idea – the fundamental point is still the same. A 95% LTV mortgage in the current market place is not helpful!!!!
A few things I suspect most of us know:
- We know FTB's want to get on the housing ladder
- We know that house prices are not affordable
- We know that wages are low and falling
- We know that unemployment is rising
- We know that interest rates are going to rise
Questions for the banking industry
We know all of the above, and (perhaps unwisely) assume you (the bankers) do too. Nonetheless, I have these questions for anyone who is in banking or mortgages and prepared to go on the record:
- How and why is it a financially good idea to offer such ridiculously high LTV lending in the current housing market?
- Who will bail you (the banks) out AGAIN when/if the housing market falls further?
- At what point did you decide that first time buyers were devoid of basic arithmetic and common sense?
- Even David Miles, one of the top bods at the Bank of England, has admitted that high loan to value mortgages were perhaps not such a good idea – how exactly can the lending world still contradict this by issuing these products?
- If the media industry were forced to add disclaimers on press releases about mortgage and banking products to the extent that is currently done with stock market reports and filings – how many of your mortgage products would you have to stop advertising?
- Why does the mortgage industry feel "being able to afford repayments in the future" is a throwaway piece of small-print?
If you are in banking or the mortgage business – feel free to respond in the comments section below (no swearing please!). I am genuinely interested in discussions on the subject.
If you are not a banker or mortgage provider and would like some answers to the questions too – feel free to share this article using the social media buttons below and see if we can get some response from the financial world.