I’m afraid we have little but misery for you in this week’s magazine. Stockmarkets still aren’t safe. Commodity prices have seen their largest fall in 28 years. The oil price has crashed below $120 a barrel making – as we have long suspected – $90 a lot closer than $200. China is clearly in some trouble. And, of course, the housing market remains a disaster area. Prices are anywhere from 8%-15% off their peak already (depending on who you ask), weak borrowers coming to the end of cut-price deals are finding themselves at the mercy of their lenders’ Standard Variable Rate (hence the 41% rise in repossessions) and volumes have disappeared. In June, says Henry Pryor of Primemove.com, there were no sales at all in 1,000 of Britain’s 2,851 post codes.
Still, there is some good news out there – for a small minority of the population anyway. The papers say that it just isn’t possible to get a Northern Rock style 125% “Together” mortgage anymore. They’re wrong. I had breakfast this week with an old – and very successful – friend. She’s in the process of buying a pretty house in the country. The asking price was £800,000. She’s offered the sellers £600,000. They’re taking it. So how much do you think she is borrowing to complete the deal? £400,000 perhaps? £500,000? No, she’s borrowing £750,000 – the house needs work and she likes to plough the money she makes professionally into her businesses, not her houses. Most of the money comes as a mortgage and the remainder as an unsecured personal loan. The total? 125% of the price of the house. It’s a sort of rich people’s Together mortgage.
The point is this: there is money out there and it is perfectly possible to get a mortgage of any kind you like, just as long as the bank is sure you will be able to pay it back. This friend’s private bankers know she can. But they also know most of the nation can’t.
This, of course, is just one reason why Alistair Darling’s moronic plan to cut or defer stamp duty in Britain to stabilise house prices can’t possibly work as he wants it to. Simon Nixon looks at this in more detail on page 15, but also worth noting is the fact that, like most of this Government’s nonsense plans, this one will not only not boost the housing market or the economy, but it comes with a good chance of doing the opposite.
Imagine you had convinced yourself that the housing market wasn’t so bad and that you might seek out a desperate vendor prepared to cut his price from, say, £500,000 to £400,000. Then imagine someone told you that if you waited a few months there was a good chance you might be able to get your bargain tax free, hence saving yourself £12,000. Odds are you’d call a halt to your purchase and give your landlord a ring to extend your lease for a bit. Mortgage approval numbers are already down 70% from their peaks. Much more talk about changing the stamp duty rules, however temporarily, and that number will be 90%. So much for supporting the housing market.