James Coney  

Mortgage market isn't broken but house prices are

James Coney

James Coney

So we have another plan to help first-time buyers: the 50-year mortgage that can be inherited by your children.

Do we know how it works? Of course we don’t.

Does the now outgoing prime minister who is, apparently, a fan of these deals? Of course he does not either.

Has anyone told him that when the Japanese tried this idea it ended in dismal failure? Don't be ridiculous.

I was one of the few people in The Times newsroom who recalled that we have been down this road before, in 2014, when a previous Tory prime minister was asked for his latest idea to help first-time buyers.

It’s like long-term fixed rate mortgages. Not only could I recall the last time they were touted, but also the original David Miles report in 2004 that had first put them on the radar of a government desperate to help first-time buyers.

I could not possibly guess how many first-time buyer schemes we have had between then and now.

At the moment we also have the unwinding of some of the reforms brought in after the global financial crisis.

I’m not long in the tooth at all, and I remember clearly what the world looked like before 2007 and that mildly terrifies me.

Still it's all in the spirit of helping first-time buyers.

We have all this because we have a government that is obsessed with the idea that the mortgage market is broken.

The former chancellor Rishi Sunak was asked that very question on the Radio 4 "Today" programme, and did not correct the assertion.

But they should. If UK Finance was doing its job as a lobby group representing the banking industry it would stand up, dispel the myth du jour: the mortgage market is not broken.

First-time buyers typically take out loans of 3.52 times their income – even at the height of the mortgage boom in 2007, when banks such as Northern Rock were lending seven times income, the average first-time buyer was only borrowing 3.33 times.

Since the end of 2020 there have been roughly 34,000 first-time buyers getting on to the ladder every month, a figure not seen since 2006.

Loans have stretched longer and borrowers now spread out repayments over 30 or even 40 years, rather than the conventional 25.

In the first three months of 2010 the average first-time buyer borrowed 67 per cent of their property’s value, according to the Office for National Statistics. By the end of last year, this was 76 per cent. 

Mortgages are flexible and plentiful, and banks have gone to great lengths to stretch affordability to help people get on to and move up the ladder. Actually, the fact that rates have stayed so low for so long and underwriting has improved massively is a success that rarely gets mentioned.