10
Mar
March Winds
Nick Churton of Mayfair Office offers a timely warning for those
playing the UK property market this spring.
"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 may now be 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 spiraling 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.
On their own the Northern Rock mortgages will not be enough to help
the housing market. But it is a start: and perhaps, along
with greater activity in the market, a sign that we are entering
the first stage of recovery. Our offices are showing clear
indications that there is a fresh wind this March and that it is
blowing a certain amount of good."
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