Economic squeeze is coming

If I had a pound for every time a broker had told me in the past fortnight that enquiries were “off the scale” then I would have enough for that townhouse in Kensington.

But things are genuinely booming. We will see it for real in the figures when they actually catch up with the anecdotes.

It is tempting to think there is something reckless in all this, but I have not seen that so far.  

And anyway, we have seen some newspapers already screaming at the banks to lend more, when we all know what a slippery slope that would lead to.

What we are seeing is masses of remortgaging, which is highly sensible when rates are so low, and first-time buyers making pragmatic decisions about where they can afford to live based on the new affordability restrictions placed on them by banks requiring bigger deposits and lowering income multiples.

And we are seeing plenty of homeowners with lots of equity and no income problems ‘upsizing’, by taking money out of their current home and moving out of cities.

What we are seeing is masses of remortgaging, which is highly sensible

All perfectly pragmatic.

Loans are flooding out the door as banks and building societies look to bolster their balance sheets with good quality lending. 

It is almost as if there were no crisis, no economic troubles, no furlough, no plight for millions of self-employed.

For that reason it will not last. It is like the whole of the mortgage industry has heeded the message from the chancellor which is to spend, spend, spend and borrow, borrow, borrow.

Let’s not pretend that a squeeze is coming.

I do not have a problem with this for the time being, because what I am concerned about is calls for the banks to do more.

We, and I mean journalists and brokers, must not go back to demanding greater flexibility for a loosening of credit criteria.

It was worrying to read in one paper an investigation that revealed borrowers had been penalised by lenders for taking payment holidays.

As far as I could tell from the piece, banks had done as promised and had not put this on credit scores.

But this does not stop lenders from acting more cautiously on borrowers who have had reduced income for a period of time.

Of course they would, and if we care about the health of our banks and of the financial health of borrowers we should want them to do nothing less than this.

This is pragmatic and sensible, particularly as we enter a period of economic hardship that we all know is coming.

It would be utterly foolhardy of the banks to allow borrowers whose income is uncertain to take on greater lending. 

Really we must not forget that we are currently in a lull before the storm. We must not pretend that it is not coming. 

As the Office for Budget Responsibility predictions show, at best, house prices could be flat next year. At worst, we could have a crash of 12 per cent.

We should prepare for that.

Platforms vs going direct

I had a debate with a reporter the other day over the benefits of going direct with a fund house and using a platform.

He was arguing that it was unfair that you could get preferential pricing if you went through an intermediary. Why could you not just ring up and get the same share class direct? That way you would save in platform fees.

I understand the logic, but frankly, for anyone with a sensibly diversified portfolio why would you want to go direct? Transferring would be a nightmare; it would play havoc with your Isa and pension wrappers, plus you would have to remember all those account names.

Investment houses, in general (because there is the odd exception) do not want to have anything to do with their end customers. I am fine with that, because platforms are convenient and make your life eminently easier.

The difficulty is choosing the right one.

Consumer habits

Last weekend I went to the shops for the first time since February (other than the supermarket). I spent £80 in Decathlon and felt positively decadent. Our household spending has plummeted since lockdown and while I want to support the economy, I really do not want to go back to where it was before.

I suspect many people feel the same. And that is a problem for all of us.

James Coney is money editor of The Times and The Sunday Times

@jimconey