Personal debt continues to attract huge amounts of media comment, with the amount of outstanding mortgage debt sharing the spotlight with credit card debt and more recently the growing interest in payday loans.
We read that the average mortgage borrower now has to commit a smaller percentage of their disposable income to their mortgage than for many years, yet we also know that many potential borrowers are not able to meet the criteria imposed by lenders. This suggests that many borrowers have had their loans for some time and that the income multiple they now require is much less than when their loans were taken out.
Credit card lending suggests that a segment of consumers is relying rather less on this type of finance but the growth in payday loans clearly suggests that the tough economic climate is having a real impact on other consumers.
It could be argued that the solution to the country’s economic woes lies in generating more manufacturing jobs by making for ourselves more of the goods we do buy and exporting some of our produce to overseas markets but the fact is that many consumer goods are not manufactured in the UK and are imported at a cost to the nation’s balance of payments.
Housebuilding is beneficial to the economy by creating jobs in construction and a wide range of suppliers. In addition, the end product is an asset which has lasting value.
Given these benefits and the large and unsatisfied demand for housing, there should be a serious examination of why so few houses are being developed.
The first factor for a developer is the availability of suitable land. However, even in the most populous areas of the country, spare land has been identified and the environment created in and around the Olympic Park is a classic example of what can be achieved in even the most difficult circumstances.
Yet before any building can start, detailed planning permission has to be obtained and local authorities have frequently imposed requirements which endanger the profitability of the scheme.
There are requirements which affect the density of housing and Section 106 of the Town & Country Planning Act requires that agreement has to be reached with the local authority about the impact the scheme will have on services provided by the authority, such as roads, schools, shops, etc.
Ministers have recently identified that a large number of developments are stalled as a result of delays in reaching agreement on such matters, with many developers claiming that the demands of Section 106 make planned developments uneconomic. No developer will go ahead with a scheme unless they are able to see a reasonable return, given the often huge cost of completing such significant projects.
Removing the bureaucratic obstacles to supply in the market still leaves the problem that buyers have in financing the purchase. Lenders are facing harsher regulation with more onerous capital requirements; this has both reduced their ability to lend and has also led a drive to improve margins on any lending they have already made, as evidenced by the recent adjustments to SVRs.
There is no doubt that in many parts of the UK, there is a significant housing shortage and economic growth will only be sustained if workers are able to find affordable accommodation within a reasonable distance of their place of work.
Action is needed to ensure that there is an adequate supply of suitable properties and that finance is available to enable responsible borrowers to complete purchases.
Richard Fox is chief executive of the Society of Mortgage Professionals