The FSA won't kill the housing market recovery – it's doomed anyway
The FSA has finally decided to 'do something' about reckless lending. But its proposals are too little too late. And whatever anxious property bulls may claim, they will have no impact on house prices.
Another empty stable door is about to be shut. Having failed to do anything in the good times about mortgage deals that offered 125% of the value of your home, six times your salary, or no proof of income, the Financial Services Authority (FSA)has finally decided to "do something" about reckless lending.
But its proposals are too little too late. And whatever anxious property bulls may claim, they will have no impact on house prices.
The FSA's proposals are garnering plenty of headlines but are actually pretty modest. Although not finalised, they are expected to require lenders to show that a borrower has proof of income. Further, says Melanie Bien of Savills: "the capital resources of lenders will be considered" with the possibility of "new levels being set".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Buy-to-let mortgages may also come in for tighter regulation. But who will actually change tack as a result?
Sure, self-certification of income used to be popular, accounting for 23% of residential mortgages, but only one lender still offers this type of product. That's because no-one wants it any more. Any self-employed people or freelancers thinking of applying for a big loan to fund an asset that will probably drop in value in the current economic climate are, to put it charitably, in a minority.
It's the same with buy-to-let: it's yesterday's investment. Many amateur landlords who bought near or at the top of the market would probably be happy to back out altogether if they could find a buyer. Few are anxious to get themselves further into debt, whatever the lending rules.
Meanwhile, about the only measures that would have a direct impact the imposition of formal loan-to-value limits and/or income multiples are unlikely ever to be introduced. They are not needed. Lenders are already rationing credit and mortgages, fearful of more bad debt losses.
So ignore the brouhaha being generated about the FSA "killing off a housing market recovery". There are bigger forces at work rising unemployment for starters that will do the job much more effectively.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.
He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.
-
How ‘Bed & ISA’ could save you £15,000 over a decade
Moving your investments into a tax-free wrapper through ‘Bed & ISA’ transactions could save you thousands over the long run by cutting your tax bill
By Katie Williams Published
-
House prices hit record high, says Halifax
UK house prices rose 3.9% over the past year, with a typical property now costing £293,999. We look at which regions are seeing the strongest growth, and whether the rally in house prices will continue next year
By Ruth Emery Published
-
House prices to crash? Your house may still be making you money, but not for much longer
Opinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
By Merryn Somerset Webb Published
-
Prepare your portfolio for recession
Opinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
Investing for income? Here are six investment trusts to buy now
Opinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
By Merryn Somerset Webb Published
-
Stories are great – but investors should stick to reality
Opinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
By Merryn Somerset Webb Published
-
Everything is collapsing at once – here’s what to do about it
Opinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
By Merryn Somerset Webb Published
-
Value is starting to emerge in the markets
Opinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
By Merryn Somerset Webb Published
-
ESG investing could end up being a classic mistake
Opinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
UK house prices will fall – but not for a few years
Opinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
By Merryn Somerset Webb Published