PricedOut welcomes FSA proposals for tougher mortgage regulation

PricedOut, the campaign for affordable house prices, welcomes the Financial Services Authority’s move to introduce greater regulation for mortgages.

For the last 10 years, irresponsible lending has helped to fuel house prices out of reach of first-time buyers. At their peak, house prices reached nearly 6 times the average salary[1], putting the dream of home ownership out of the reach of many. There are now an estimated 1 million first-time buyers waiting for house prices to return to affordable levels[2] so that they can get a foot on the property ladder. Reassuringly, almost two fifths of prospective first-time buyers are now increasing the rate at which they save towards a deposit in the wake of house prices returning to affordable levels[3].

If greater regulation had been introduced 10, or even 5 years ago, house prices would have remained at more affordable, sustainable levels. Instead, many are facing the threat of negative equity and repossessions are expected to soar to 75,000 this year, their worst level since 1992.

A PricedOut spokesperson, said:

"The last decade has seen lenders introducing much greater levels of financial risk to the housing market. But houses are not like stocks and shares, and should not be viewed as such. Although it may restrict choice during the recession, people are understandably already more cautious in the current economic climate. Many do not see now as a good time to take out higher levels of debt, but instead would rather take a long-term view and wait for house prices to return to more affordable, sustainable levels.

"We are already seeing the inevitable reaction[4] of those would like house prices to stay high, such as the UK’s 1 million property investors. Trevor Kent, former President of the National Association of Estate Agents, calls the move 'suicidal'. Melanie Bien, of mortgage broker Savilles, was quoted as saying, 'If you insist on putting a limit of three times salary, you will end up with as a subdued market as you have now. Prices will have to come down even further for first time buyers to afford a property'.

"This is exactly the outcome that PricedOut would like to see. Far better for house prices to return to affordable levels than for first-time buyers to acquire debts on over-priced properties during a recession.

"PricedOut.org.uk has long been campaigning for sensible loans and welcomes any regulations that enforce sustainable lending policies. In 1997, Gordon Brown said he wouldn't let house prices get out of control. Twelve years later, after the most destructive property bubble in history, these regulations are the only chance of his promise being kept in the future."

[1] Halifax House Price Index 2007
[2] Royal Institute of Chartered Surveyors statistic, 2008
[3] Research Report, Abbey Savings, January 2009
[4]Telegraph.co.uk, March 17th 2009

Ends

Notes

PricedOut continues to campaign the Government to:

- Tackle the root causes of the housing affordability crisis, not just the symptoms;
- Recognise that over-priced house prices are not a good thing;
- Build more affordable homes;
- Stamp out property speculation and tax multiple home-ownership;
- Tackle irresponsible lending.

For more press information, please contact: press@pricedout.org.uk or
07545 147771. Please note our new press contact number. Our website is www.pricedout.org.uk.