It would be a complete joke if it only delivered a humourous punchline rather than an almost literal kick in the guts but the only people laughing in the aftermath of the measures introduced by the UK Mortgage Market Review are those with sufficient funds not to require a mortgage.
The new measures are designed to stress-test your income against various inflationary scenarios to see if you can afford mortgage repayments no matter what the government of the day does to cock-up the economy. Some mortgage providers have up to 50 questions covering everything from how much loose change you have in your pockets, the measurement of your inside leg and how many times a week you dare to enjoy yourself! Is there seriously a need to be so intrusive?
It's not as though we are even afforded the chance to stress-test our banks or politicians, despite the open knowledge that it's our hard earned wonga that's keeping them in the luxury they've become accustomed to. Who asked us before deciding to use £39 billion of our tax money to bail out the Royal Bank of Scotland? Where was our platform to investigate the deal and satisfy ourselves that our money wasn't being squandered?
That's the trouble with living in a democratic society. Whoever is in power at the time is only concerned about the short-term and although they bleat on about sustainability, I doubt they would actually know what that was if it slapped them in the face with a wet fish, (a tempting thought indeed).
The most irritating thing is the fact that affordability is being made harder and harder for regular homebuyers but if you have significant cash or investment money for a buy to let property, the process couldn't be easier! Furthermore, since the Chancellor graciously allowed pensioners to claim their entire lump sum on retirement in the recent budget, the buy to let market has taken off which can only mean one thing - rising house prices.
Meanwhile back in London, foreign buyers are snapping up all our prime real estate. Russians looking to stash their cash lest any sanctions threaten it have siphoned more than $51 billion out of the country since January 2014 and most of it is finding its way into London's property market.
Again, this can only mean one thing – rising house prices.
So in essence, the people WITH money are inflating the property market so that those of us WITHOUT money won't stand a cat's chance in hell of getting so much as a toe on the property ladder. How can that be fair and more importantly, how can that be sustainable?
What happens when London is almost entirely owned by foreigners? What happens when the majority of Brits are living in rented property with their parents as landlords? What is ultimately going to happen to the rights of the ordinary citizen when it comes to home ownership?
Fortunately, I currently live in Spain and have done for more than a decade. In Spain we expect this kind of bureaucratic nonsense as part of the culture. You can't even buy a car here without having to go to a government agency with proof of who you are and where you live and a readiness to fork out a couple of hundred euros for the privilege of transferring the car into your name. But in the UK? Really??
One of my neighbours has been in negotiations with Spanish bank Santander who provides his mortgage because his capital and interest repayments have spiralled upwards to such a degree that it's no longer affordable for him. He is a pensioner having just retired a couple of months ago. A few days ago a young girl from the bank called him. She told him she was the new Head of Risk and wanted to talk to him about his repayments. During the course of the conversation she suggested he get an evening job….a bit of bar work perhaps… or that he consider taking in a lodger. Unbelievable, but then not that far away from what is going on back in the UK either!
The thing is……lenders these days know without doubt that there will be financial hardship again. It's a cyclical thing which in my opinion is intentional – market volatility creates opportunity for the rich to get richer and is a necessary part of the global economic balance, if you will. What goes up can't continue to go up ad infinitum. It has to go down to go up and when it's down, that's a buying signal and when it goes up again, a selling signal, (if you have the money that is).
For most of us, when the market is flat we tighten our belts and cut down our expenditure and when the market is bouncing back, we struggle to afford the essentials, sometimes at the expense of other essentials. Win/win for the haves – lose/lose for the have nots.
The BBC has designed an affordability calculator which although informative is at the same time highly depressing! Whether renting or buying, I found that I was unable to afford anything at all in the London area where I lived for most of my life. Cheer yourselves up and take a look too by clicking HERE.
It really beggars belief.
- Friday 09 May 2014