It would seem to appear, if the latest newspaper headlines are not all completely the works of fiction, that the brains behind the UK's finance and banking world have finally lost the communal plot and began to lead us down to what I can only see as financial suicide.
Here are two links to support my point :-
Money Week
Telegraph
The current train of logic of these boffins is that the price of housing in the UK has reached a point so high that first time buyers cannot afford to purchase one.
So, instead of concentrating their efforts to :-
Increasing the earnings of the average person;
Reducing the price of housing;
Building more affordable housing;
Reducing the amount of associated house purchasing costs;
Or reducing the interest rate { they have actually increased it for other reasons apparently }
... they have decided that the best choice of action is to increase the amount of years that you can chose to repay your mortgage over. { Wow, nice choice, that's exactly what I would have done ... NOT. }
To give an example, it is now technically possible for an 18 year to take out a mortgage over a massive 52 years and end up repaying almost 6 times what he initially borrowed, with his final repayment just before he starts to claim their pension { for, no doubt, it will have been raised to at least 70 by that time }.
Also they have increased the amount of times your salary that you can borrow to enable you to purchase more expensive houses than ever before.
And finally, they have actually started giving more than 100% mortgages, which means that they will allow people to purchase a property and instantly be in negative equity, instead of needing to come up with any deposit or down payment.
In real terms this means that instead where before a persons situation was :-
Income = £20,000 / Mortgage Allowed 3.25 x salary = £65,000 Borrowed / 5% Deposit = £3,250 / Property Value £ 68,250 / Equity Upon Purchase = £3,250 / Repayable over 25 Years at £227.50 per month ( plus interest ) ... Total paid after interest of almost £117,000
You now get something that is more like ...
Income = £20,000 / Mortgage Allowed 5.05 x salary = £101,000 Borrowed / -5% Deposit = £5,050 / Property Value £106,050 / Negative Equity Upon Purchase = £5,050 / Repayable over 40 years at £220.90 per month ( plus interest ) ... Total paid after interest of almost £286,350
So although the monthly repayments are slightly less and they can purchase a house of a slightly more value, the same person who would only pay £117,000 now will end up paying £286,000 for more of less the same kind of property AND they will be locked into paying this probably right up until their 70th birthday.
Plus if the property market was ever to fall the person would, instead have a little equity in the house to fall back on, find themselves completely shafted and have literally less than nothing to show for it.
Need I say that I feel all this is a bad idea and can only hasten the next financial crash in the UK economy? No, I probably don't !!!
My REAL concern, is that I doubt these financial boffins have ever tried talking to a teenager recently. With their chavisms and "not bova'd" attitude towards any of their civic duties and responsibilities, it is only matter of time before these unruly children suddenly face the cold hard reality of the real world and are completely unable to cope or meet repayments.
And who could blame them? For the last few years they have been granted far too much free will and lost most of their moral values and discipline along the way, and yet these money maestros expect them to understand the implications of a contract that won't expire in less than twice their current years alive !?!
If they can't seem to grasp why 'happy slapping', 'teenage pregnancies' or addictions like smoking, drinking or recreational drugs, are bad ideas, then how can they comprehend documents that are so crammed with technical jargon and small print that it takes a dedicated lawyer { who had to spend many years studying in order to become qualified } many hours over several weeks to complete.
The short answer ... they can't, they won't and when those who are making the decisions realise this it will be far too late to remedy this colossal error in judgement.
No comments:
Post a Comment