Peter Bolton King Blog - 25/08/10

The time has come, in my opinion, for more pressure to be placed on to the major lenders to re-evaluate their criteria for mortgage lending.

The reason is that the present system just doesn’t add up in any way that can be beneficial to the housing market or, ultimately, the consumer.

Over the past few days there have been a number of reports in the media, each along the lines of ‘who would be a first-time buyer in 2010?’ and often suggesting that those young people who do not already own a property may need to readjust to the idea of never owning one.

Much of this is unnecessary. The reason why young people cannot afford to get on to the property ladder is less to do with house prices or wages and more to do with deposits.

A young couple, for example, with a combined wage paying rent on a property in London might well be able to afford the current monthly mortgage repayment. Without parental help, however, even with an above average wage, it will currently be almost impossible to find the tens of thousands of pounds needed before a mortgage will even be considered by a high street bank.

True, lower house prices would by definition lead to lower deposits – but these deposit figures are not, as far as I can see, set by any kind of market forces. They are arbitrarily chosen by lenders with a view to improving their own liquidity.

One can understand, given recent history, why a lender might want to do this. But to do so at the expense of a generation’s aspirations of home ownership is a disgrace.