16
Mar
MARCH WINDS
Paul Twyneham of Paul Twyneham & Company takes a fresh look
at the property market and suggests that all is not quite so
depressed as many commentators would have us believe.
March is traditionally the month of high winds: and already
there is some wind of change in the market. The recent half a point
interest rate reduction presages another record low and is the
sixth time that UK borrowing costs have fallen since October, when
rates were still five per cent. With its rate-cutting ammunition
all but exhausted, the Bank of England are now left with only one
card to play – quantitative easing – better known as
printing money. But homeowners have rather enjoyed a licence to
print money for over a decade, and although this has stalled now,
there are signs that new opportunities are opening up again. Yet
both lenders and government seem to be out of step with reality
– along with some reporters.
The recent announcement that Northern Rock will, once again,
offer mortgages came as good news. However, the caveat that this
£14 billion lending spree - to be spread over the next two
years – is not targeted at first time buyers, but will
primarily serve to provide 'relatively small loans to unlock
chains', came as a bit of a kick in the teeth to those wanting to
climb onto the housing ladder. Surely it makes more sense to
unfreeze the market by initially helping first time buyers and
getting the market moving from the bottom rather than trying to
kick start it in the middle. Nothing ever started in the
middle.
In line with Gordon Brown's wish to ban mortgages for one
hundred per cent of a property's value, 'The Rock' will be lending
no more than ninety per cent of value. This seems to be shutting
the stable door after the horse has bolted. Few would argue that
the one hundred per cent mortgage was always a dangerous policy.
But what is galling for most of us is, that having encouraged
everyone to borrow, borrow, borrow – whether they could
afford it or not – the political and banking classes are now
busy lecturing everyone on how irresponsible maximum value
mortgages are. To my mind, this is institutional hypocrisy as the
advice is given without hint of irony, and as if they would or
could never dream of suggesting such a stupid course of action.
Of course any measure to improve the supply of lending is good.
But the aid should be targeted at where it will be most beneficial
for everyone. It should also be introduced within a mix of other
measures designed to take advantage of the market position we are
in. A moratorium on Stamp Duty, key worker mortgages, the
reintroduction of local authority housing and imaginative joint
ownership schemes could all help to provide new, exciting and
affordable homes for many that have been locked out of the market
through spiralling prices over the past five years. If this group
were helped, the rest of the market would surely follow on. If they
are not, we will only increase our housing problems.