About six or seven years ago I received a call from a London-based TV production company about a new series they were hoping to make.
Each weekly episode would focus on someone with a different money challenge, with me cast in the role
of the “financial godfather”. The hour-long episode would film us both as we hopefully came closer to realising the person’s goal in the following weeks.
The opportunity of television stardom does not come that often – which was why a couple of days
later I caught a cab out to a cavernous studio in West London for a screen test.
When I got there I discovered that what the producers had in mind was for me to interview a young woman in her early 20s – let’s call her Jane – who wanted to buy a house with her boyfriend. My initial task was to quiz Jane and then suggest ways of achieving that goal.
The problem was that as our chat went on, it became clear there was no way on earth any sane lender should have provided Jane and her partner with a penny.
I no longer remember what the couple’s joint income was but I do recall they were looking for a 100 per cent mortgage almost five times their combined salary. They did not even have the money to pay legal or mortgage application fees or for a survey of any property they might have wanted to buy.
Not only that, but Jane also owed thousands of pounds on several credit cards thanks to a compulsion to spend a small monthly fortune on toiletries, clothes, shoes, going out and foreign holidays.
Meanwhile, her boyfriend was paying a couple of hundred quid a month for a fancy car, which consumed something like 20 per cent of his net income, taking a loan, insurance and road tax into account – and his own spendthrift lifestyle was similar to his girlfriend’s.
My verdict, which went down like a lead balloon, was that if Jane thought I would advise her how to buy a house in these circumstances, she must take me for an idiot.
Before Jane even considered a home purchase, she should pay off her credit card debts, stop her bonkers spending sprees and set aside a few grand for the various bills she and her boyfriend would face if they ever did make an offer on a property. He, meanwhile, should dump his expensive motor and stick to a bicycle.
As I imparted these opinions to a by now sullen Jane, I could hear gasps behind the camera, which I took to be signs of admiration and approval for my sagacious comments.
They were anything but: what I had actually done was to not only crush Jane’s home-buying aspirations. I had also put a spoke in the wheel of the producers, who had wanted her to be the first subject of the proposed series.
So it was that an hour later I found myself in a cab heading back to Hammersmith tube station, my aspiring broadcast career in tatters.
Fast-forward eight years to new rules introduced last week by the FCA forcing anyone who applies for a mortgage not just to give details of their income but to answer questions about their spending – from the cost of regular haircuts to gambling and club subscriptions and deliveries, holidays, travel season tickets and childcare.
According to the BBC, borrowers will also be expected to say if their financial position is expected to change, including predicted changes in income or working hours as well as any plans to have children in the near future.
Some newspapers have described this as a terrible intrusion into would-be borrowers’ private lives, with commentators suggesting the FCA’s Mortgage Market Review will single-handedly bring the current property boom to a halt, undoing months of “positive” work by the Government’s Help to Buy scheme.
Who knows, it may well do. But you know what? I’d rather people were forced to think carefully about what kind of home loan they can really afford, with a few thousand borrowers turned down every year because their disposable income does not remotely match their borrowing aspirations, than see a repeat of the early-to-mid-1990s.
Back then, I remember good friends of mine being forced to return their house keys because they could not afford their mortgages when interest rates shot up. Years later, just when they thought everything had been forgotten, they found themselves hounded to repay their lenders’ losses.
This time round, the only reason we avoided a financial meltdown was because interest rates remained stubbornly low for years – and because lenders tried desperately hard to avoid the repossession mistakes of 20 years ago.
Next time, however, there is no guarantee of such a relatively benign scenario.
As for Jane, I have no idea whether she took my homily against excessive borrowing on board.
In fact, I don’t even know whether the TV series got made. Probably the concept was overtaken by the financial crisis that engulfed the industrialised world within months of my failed screen test.
But I’d like to think my words had some effect on Jane. If they did, it was almost worth giving up a television career for.
Hopefully, the MMR will have a similar impact on thousands of other borrowers.
Nic Cicutti Can be contacted at firstname.lastname@example.org