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Double-faulted by Darling

Chancellor Alistair Darling knows how to make friends and influence people. It seems that he is intent on blaming mortgage lenders and brokers for no end of society’s ills.

Apparently, it is their fault that there is “unsustainable house price inflation” and that the average person does not want a long-term fixed rate. Ah, if only things were that simple.

Property prices are a function of supply and demand. There has been high demand for housing, especially in the major cities, as the population continues to grow, coupled with a large amount of immigration.

The trouble is that the UK is a small island and we are not only way behind our house-building target but we are also facing the issue of where to build them.

The vision of a country covered in concrete with no green spaces is clearly a scary thought. Something therefore has to give and to lay this issue at the feet of mortgage lenders for making it easy for borrowers to buy their own home is clearly ridiculous. If lenders did not want to lend, there would be an outcry.

As Council of Mortgage Lenders director general Michael Coogan says: “It was his predecessor who was encouraging lenders to increase homeownership – a million extra homeowners in the last 10 years – and set a target for that to be repeated in the next 10 years.”

Recent figures from the Bank of England show that the number of new mortgages given to housebuyers has fallen by 20 per cent in the past year, with the number of new mortgages approved by UK lenders in September being the lowest monthly figure since July 2005.

Essentially, house prices are market-led and cyclical. We are going into a period where a correction in prices is required and we are seeing it happen.

This is happening too slowly for some of the more entertaining websites that are set up to discuss why house prices are overvalued and expose the “lies” of people in the property industry that keep prices high. The threads of conversation on these sites are a particularly good read as people lambast terms such as “price correction” and call for nothing less than a fall of 40 per cent in house prices that will “serve them right”.

Perhaps I am being too simplistic but talking up a fall like this cannot be in anyone’s best interests.

Back to another favourite Government topic, I was interested to see that it is also apparently the fault of lenders and commission-hungry brokers that the public are not taking out long-term fixed-rate mortgages. Really?

Have Mr Darling taken time to look at the myriad of products available for 10-year-plus terms? There are many competitive rates around and, by competitive, I mean offered by lenders at a realistic rate governed by the current money markets. There are loans with penalties, some with fewer penalties, long-term trackers with fully flexible features and offset facilities.

The reality is that generally people do not like to take out a mortgage beyond a few years as circumstances tend to change. Human nature also draws people to the cheapest products, namely, shortterm mortgages. If all these disappeared overnight, there would no doubt be a public outcry and the Government would blame lenders for trying to make more money.

You can’t have it both ways, can you Mr Darling?

Andrew Montlake is a partner at Cobalt Capital

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