Madness Epidemic Hits Housing Market

This week (bear in mind it's only Monday afternoon as I write) a Buy to Let millionaire has announced he is standing to be the next Kent Police Commissioner stating that he has the financial skills to help run Kent Police...

If I announced to the world that I was going to apply for the position of chief rocket designer at NASA and justify it because I once rode a bicycle really fast, I would expect most people to not only look at me as though I had lost the plot, but also quite likely declare me insane and have me sectioned.

This week (bear in mind it's only Monday afternoon as I write) a Buy to Let millionaire has announced he is standing to be the next Kent Police Commissioner stating that he has the financial skills to help run Kent Police.

Having reasonable knowledge myself on how Buy to Let works (although admittedly low levels of knowledge on how the Police work) I am struggling to see exactly how owning 100's of properties qualifies anyone to be responsible for part of a Police force?

The man in question (Fergus Wilson) even states "[he is] unconcerned about his own lack of experience in policing and admitted he had only just learnt that Ann Barnes was the current chair of the Police Authority." And then subsequently confirms his own shortcomings with the following: "The person has to be high profile. Most people don't know who the Chief Constable is or the chair of the Police Authority."

Good to know Fergus is up to speed for the role! I wonder if his Buy to Let business model would still work in the current financial climate if he started again from scratch? I somewhat doubt it – it takes time to build a portfolio of that size and involves a sizeable amount of financial juggling. Even then, the finances of the Police force just aren't going to correlate. You can't nip down the local bank and ask some equity release to free up cash for a better Police force – that's called racketeering!

The second bout of madness this week emanates from The Telegraph with the headline "First-time sellers find themselves stuck in unsuitable flats" Now whilst this might be a slight change in tune from the usual "first-time buyers can't afford a house" rant from the UK press – it does raise a few points on several levels.

The opening statement in the article reads "Families who are looking to move into larger properties are finding themselves stuck in first-time buyer flats because they cannot sell their homes or get a mortgage." Hmm – given that these people are "first-time sellers" – surely that would imply they are trying to sell to first-time buyers, and the property they are trying to sell is ideal on the account that when they bought it, they were indeed a first-time buyer?

Apparently though that's not the problem (having said that, the article is based on a survey by a bank – read into that what you will!). The problem it would seem is that the current "first-time sellers" properties were bought at the height of the market with high loan to value mortgages (around the 100% LTV region), house prices have fallen and lending restrictions have tightened. As a result, said sellers just don't have the cash or equity to cover the costs of buying another house – even if they aren't in negative equity land.

My point on this subject is not so much the situation itself, more the fact that it was able to happen, and to a degree still is, as banks continue push up LTV rates whenever they can.

There is only one lesson to learn from this – the banks and mortgage providers lost their way long ago for some reason falling into the trap that "fees now" are more important than running a bank responsibly. Leveraging with a mortgage can be a fantastic thing when you get it right, and your bank manager will be your greatest friend as a result (and who knows, you too could run for Police Commissioner!) – get it wrong and you might as well sit back and wait for the four bailiffs of the apocalypse while your bank manager cruises the streets in his shiny new Porsche.

- Tuesday 28 February 2012

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