As the UK financial markets, regulators and institutions have taken a fair old beating of late, the main topic floating to the top at the moment has been mortgage regulation.
The key reason seems to be that the FSA (Financial Services Authority) have decided that they need to take a look at the way buy to let mortgages are issued, with numerous industry professionals pointing the finger of blame at “newbie landlords”.
In layman terms, the boom in Buy to Let saw a huge number of marketing enterprises launching various products that would teach you how to make money by being a landlord in a varying number of steps. (depending on who you listened to). On paper, this was great, but at a time when anyone would lend to anyone, and if they wouldn’t, they knew another helpful bank that would, the rise in BTL mortgages was astronomic. All of a sudden, everyone and their dog had multiple properties and the future looked good.
The moment the market started to fall though, it all too quickly became a very different story. The pointy fingers came out and the hunt for who to blame was on.
If the FSA is to be believed, then it’s not really anyone’s fault at all. The answer is to “regulate it” by restricting the loan to value percentage and neatly sweep it under the carpet and hope no one trips over the giant lump.
The mortgage industry believes it’s more a combination of property obsessed media and unscrupulous salespeople packaging “get rich quick” schemes promising enormous profits for not doing a lot.
The banking industry has to be looked at here too, the now dubbed “NINJA Mortgage” (No Income, No Job and no Assets) which allowed almost anyone with a heartbeat to buy a property, provided they could sign the paperwork.
So where does the blame lie in all of this? Well to an extent it is fairly evenly spread. I doubt that regulation will actually fix it, primarily because regulators rarely get it right first time anyway. The mortgage industry itself perhaps should have taken a little more responsibility for allowing NINJA type mortgages to be created in the first place. As for the clients, well, surely taking a mortgage out that has virtually no cash or additional collateral down should ring a few alarm bells?
The media's responsibility? I think we all can now look back at the numerous repeats on TV with so called “property investment experts” and see where the problem actually began.....
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- Tuesday 02 March 2010