Vincent Cable throws London Mortgages back into the dark ages.

Vincent Cable throws London Mortgages back into the dark ages.

Vincent Cable throws London Mortgages back into the dark ages.

One of the side effects of an exciting recession is the plethora of government reports and inquiries into our misdeeds. Isn’t it amazing how much naughtiness everyone can get away with in the good times only for it all to catch up with up later?

MPs, Bankers, Journalists, Europeans, Americans, Banks, Gordon Brown and now Jeremy Clarkson. How on EARTH have estate agents not come in for a bashing yet??

And let’s be honest, we’re up that creek without a paddle, the proverbial has hit the fan and the tide has come back in and now we can see who’s lost their trousers.

And so on.

So it seems that the Vickers report, with good old Vince Cable ramming it down our throats, seems to be driving home some great messages about how UK mortgages should look in the future. It seems we’ve made a lot of terrible mistakes, lending became too lax.

So some good principles, enforced across all lenders will make lending more robust and help prevent any trouble in the future.

When I first looked at this I thought – good news really.

Then my brain kicked in. What is really going on here and who are the winners and losers? The answer is sadly predictable.

No doubt the last economic cycle saw lending get really relaxed, at the end. But only at the end. Property is either too expensive, sometimes too cheap and for a nanosecond every now and then…the right price.

What all these reports, ideas, regulations and laws fail to grasp is that in the war between politicians, bankers and Europe lies the (mostly) innocent bystander.

The lot who want a mortgage so they can own a home.

These new draconian laws represent several steps backwards. There are only losers as far as the general public are concerned.

STATEMENT: You MUST have a repayment mortgage or demonstrate a “suitable” repayment vehicle.
ANSWER: Whose definition? WHY? You are aware I will earn more in the future? (NO!)

STATEMENT: You MUST be able to afford your mortgage in 5 years time if interest rates go unto X%.
ANSWER: Think 5 years ago. If you knew what was going to happen in 5 years time, would you have had the courage to tie your shoe laces up, let alone buy a property? Who knows what the future holds?

It’s all rather dreary really. The politicians pick on some easy targets with some (at least hopefully) well intentioned ideas, which as usual are not well thought through.

The Banks just devolve their centres to India, South Africa and so forth to reduce costs and make more profits. They are not interested in listening to an individual case, just follow drop down logic as to whether they will lend or not.

OK so lets admit it, the following wasn’t great: Lend 125% of the value of a property, borrow the money FROM “the markets” via secularisation @ 7% and LEND it at 5.39%. A business bound to go bust. Good old Northern Rock.

Idiotic lending from banks, lending money they didn’t have, has already been addressed by market forces. They couldn’t do it today, even if they wanted to.

These new laws don’t and won’t hurt the billion pounds profits of banks, they will hurt the consumer, the (mostly) innocent bystander / homeowner / first time buyer / home mover /mortgage prisoner.

To be continued…

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