Affordable mortgages for key workers
Stability Brown has come up with a new tweak for a market that’s misbehaving.
It seems that in 9 out of 10 major cities key public sector workers can’t afford to buy homes. His big idea is to encourage lenders to provide shared mortgages with the Government (us, actually) underwriting part of the equity risk. With house prices about 50% above their sustainable level in real terms, the problem is not limited to public sector workers and is the result of an unsustainable credit binge – one of several indicators that the stability Brown boasts about is masking deep cyclical problems. Buyers have a simple remedy when an asset is not easily affordable, particularly when they can see it is equally unaffordable for millions like them: go on strike. Rent not buy.
There should be a second alternative. When people could not afford a freehold, they used to buy a lease – which is a fraction of a freehold. Why should people on modest incomes be forced in an inefficient market to buy an asset which will outlive their own lifetime needs? That’s not a property-owning democracy: it’s enforced penury. An efficient property market needs regulations friendly to both the supply side and the demand side and it needs them in both the rental and leasehold market. But that’s another story.