Homes and mortgages

 

At the peak in 2007 130,000 mortgages a month were being issued. House prices were rising, new buyers came into the market. The rise in interest rates and the credit crunch which the authorities organised in 2008-9 changed all that. Banks had to throttle back on new loans. Some individuals struggled to meet their mortgage payments. The number of new mortgages slumped to 30,000 at the worst in 2008.

There has been a reasonable recovery this decade. By January of this year the monthly rate of new mortgage approvals was running at 76,500.  £18.5 bn was lent. By this September the figures have fallen back a bit. 61,000 new mortgages were arranged, with a value of £15 bn. This is still well above the low point, and well down on the high point of the  bubble in 2007.

Home ownership is a good aim of public policy. It is far better to look forward to your old age knowing by then you will own your home and not face a rent bill. Owning a property will be cheaper than renting the same kind of property over a typical adult lifetime. Ownership also gives you greater flexibility about use,adaptation and decoration of your home, subject to planning rules for the bigger changes. It is also 0ften easier to switch homes and move locations if you own, than if you are a tenant in social rented accommodation.

Homes are less affordable today when comparing prices with incomes than forty years ago. Part of this reflects social change. Two earner couples are more common now, and  greater account is taken of both incomes in mortgage calculations. Part of it means young people have to wait longer, save more, and achieve higher earnings levels before they can buy their first home. Some get round this by buying property jointly and sharing.

The Mortgage Market Review has required those advancing money to be properly trained, to take full account of the affordability of the mortgage for the individual, and to stress test the mortgage asking what would happen if interest rates rose. Some say this has held back mortgage lending in recent months as people adjust to the new system. Others say this is a welcome, as it should make it more difficult for people to take out unaffordable levels of new debt.

To have a healthy first time buyer market there also needs to be a sensible balance between new home construction and additional people seeking accommodation.

 

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177 Comments

  1. Gary
    Posted October 30, 2014 at 5:47 am | Permalink

    ” It is far better to look
    forward to your old age knowing by
    then you will own your home and not
    face a rent bill.”

    in a functioning economy, it it far better to take the deposit and costs for a house purchase and create a new business, or invest in a business, and rent a house.

    That is how Germany became a massive economic powerhouse, while we lost all our industries. Capital invested in German economic growth would far outstrip anything a house could give.

    The house ponzi is our road to ruin.

    Reply Then why has the German economy performed worse than ours? Why aren’t Germans a lot richer than us?

    • agricola
      Posted October 30, 2014 at 9:20 am | Permalink

      Reply to Reply
      Because the German economy has been operating under the shackles of the EU and demand for their products has reduced within the EU. Because the West Germans had to deal with the basket case of East Germany on the fall of the wall. From my experience of Germany they are infinitely better served by their economy than is the UK. You can drive on German roads without damage to your car or your fillings. They have an extensive manufacturing base as opposed to our get rich quick financial casino we call the City.

      • The PrangWizard
        Posted October 30, 2014 at 6:56 pm | Permalink

        The comment in the final sentence of ‘Agricola’s’ piece would be an interesting subject for debate, and what constitutes ‘investment’. Germany has maintained control of much of its industry. My point is that at one time it was promoted as being to our advantage in the UK for our businesses to invest overseas because of the returns; now it seems to be that selling our industries to overseas investors is regarded as ‘inward investment’ and is to be welcomed. Is this more of the misgoverning we have been subjected to for decades?

    • agricola
      Posted October 30, 2014 at 9:32 am | Permalink

      Reply to Reply 2

      I would add that Germany’s national debt is 80.34% of GDP whereas in the UK it is 89.92% of GDP. If you take out all our earning from prostitution and the drug industry, recently attributed to us by the EU, then our GDP ratio could be much higher.

    • Lifelogic
      Posted October 30, 2014 at 9:51 am | Permalink

      House prices are a reflection of supply and demand. Houses are as or even more important to people as are jobs. They are needed to house workers just as plant/offices and computers are needed work efficiently.

      The “Libdem/Labour” idea that capital is deflected into houses rather than into businesses is a very silly argument. The money does not vanish, it goes to the vendor. Many people work from home too.

      Relax planning and build more houses or limit the population that is the choice. Get rid of the OTT green crap building regulations, so they can be build more cheaply too. Also build ones that can adapt and expand as needed so people do not need to more too often, rather than the squashed in un-expandable rabbit hutches as now.

      • A different Simon
        Posted October 30, 2014 at 1:42 pm | Permalink

        There is a third variable which comes into play when supply is constrained and demand outstrips it – credit .

        Put simply the cost of housing will increase to the maximum lenders will lend .

        Thus as house prices go up , banks will lend more on loans secured against houses and there is a positive feedback loop – where what is needed is a negative feedback loop .

        And when house prices crash down these same mortgage holders along with people who were denied the opportunity to buy a house due to prohibited cost will be required to bail out the banks without receiving a reduction on the principal of their mortgage .

        For someone to be able to sell their home for more than they paid for it in real terms the person buying has to be persuaded to go further into debt than they did .

        • lifelogic
          Posted October 30, 2014 at 4:40 pm | Permalink

          Not really as buyers still need to be able to pay the mortgage and they compare that to rents or other alternatives such as living elsewhere.

          • A different Simon
            Posted October 30, 2014 at 5:52 pm | Permalink

            I don’t see how that undermines my point which is

            – that on aggregate for houses to keep going up in real terms future buyers must become ever more indebted in real terms .

      • StevenL
        Posted October 31, 2014 at 12:38 am | Permalink

        You still can’t see any difference between land and houses can you? Houses are ‘capital’, land is ‘land’, and the loans people take out to buy land and build houses are ‘credit’ or ‘debt’.

        When a ‘credit’ bubble is pumped up by people bidding fast inflating sums of money for the same pieces of ‘land’ with the same ‘houses’ on them, it generally ends in a big crash and ‘capital destruction’.

    • MKW
      Posted October 30, 2014 at 12:11 pm | Permalink

      “Reply Then why has the German economy performed worse than ours? Why aren’t Germans a lot richer than us?”

      Multiple factors effect all economic performance, and relative performance is highly susceptible to time periods chosen. You appear to be referring to the immediate past, short periods likely to give least reliable data.

      A couple of other points: Renting offers more flexibility to move for work (your point about social housing not withstanding) allowing more efficient labour allocation. Also many older people end up living in houses that are too big for their needs and capabilities, inefficient for them and the wider population

    • Leslie Singleton
      Posted October 30, 2014 at 1:24 pm | Permalink

      Comment on Reply–I’m with Gary–Apart from all else, why would an OAP, especially if single, want to worry about tiles off the roof etc? Better to bequeath cash to one’s children than leave them to have to sell a house with all the associated drama costs and risks including squatters and possibly on the other side of the country? Normally I would be unequivocal on this and would hope that the money in the bank would provide an income (pension) stream but of course the Government has gone nothing short of crazy as regards interest rates, and for such a long time.

    • Denis Cooper
      Posted October 30, 2014 at 1:46 pm | Permalink

      Presumably somebody actually owns any home that somebody else rents? And presumably that owner will have sunk capital into that domestic property, rather than investing it in a more obviously productive business as you would wish?

      Where I would sympathise with what you say is that owning domestic property should not be the most profitable investment which is available, it should be possible to get better returns on average by investing in those more obviously productive businesses.

      I recall from some years ago, when I read that “buy-to-let” had been by far the best investment over the preceding year I thought that this was not the way to build a sustainably strong economy.

      • acorn
        Posted October 30, 2014 at 5:54 pm | Permalink

        Denis, I couldn’t agree more.

      • Iain Gill
        Posted October 30, 2014 at 6:33 pm | Permalink

        Many buy to let landlords own a portfolio of properties with a large amount of the equity mortgaged, so the banks in reality really own the houses. So the banks will ultimately stand the loss if house prices crash, taking the landlord down with them. Of course the tax payers will end up bailing them out again when this happens.

        So one of the problems with this investment is all the upside stays with the landlord (and banks) and all the downside risk stays with the taxpayer (including the very tenants being milked by the system).

    • Stephen Berry
      Posted October 30, 2014 at 1:52 pm | Permalink

      “in a functioning economy, it it far better to take the deposit and costs for a house purchase and create a new business, or invest in a business, and rent a house.

      That is how Germany became a massive economic powerhouse, while we lost all our industries. Capital invested in German economic growth would far outstrip anything a house could give.”

      i) Most people are not entrepreneurs and will lose their money if they put it into starting a new business.

      ii) A large section of the public will also lose their money if they think they can spot winners in the investment sphere. They can’t. Never have, never will.

      iii) In an economy where inflation is the norm – and that certainly means the UK – a house is the plain man’s index linked protection and somewhere to rest his bum in old age. John is right.

      iv) Given that the state has control of council housing and periodically screws up the private rented sector with rent controls, it’s important for freedom that private ownership should be as widespread as possible.

      Apropos of nothing in particular, one of the economic stories of the next decade will be the poor performance of the German economy. You heard it here first.

      • Iain Gill
        Posted October 30, 2014 at 6:39 pm | Permalink

        Maybe for folk who can have a working life in one place this works, those that need to move location frequently for work do not fit your model, and increasing proportion of the working population.

        Another problem with council and housing association properties is that the state keeps them going in areas long after all the local employers have shut down, when the local mine, shipyard and steelworks shut the natural thing would be for the people to naturally move to where the new jobs market it. In this country the way housing subsidy is tied to staying put in your council house many people are effectively trapped in areas with no current jobs market. And the market forces which would force those houses to be left behind and closed, while new houses are built elsewhere, don’t exist. So the state itself forces large numbers of people to live in places where nobody could possibly get a job.

        As for Johns stuff about buy a house to be allowed to decorate it the way you want etc, in the rest of the planet private tentants can get much longer tenancies and can decorate much more freely than the fake short term tenancy system imposed here.

    • Hefner
      Posted October 30, 2014 at 2:45 pm | Permalink

      How can you be so sure than Germans are not richer than the British? Every time I go to Germany, I see a country much more at ease with itself than Britain. You cannot judge by only looking at London. Go to small towns in Germany, whether in Thuringe or Essen, or even up north, and compare that with similar small towns in Britain. As for the health of its industry, give me German industry any day. And the overall worker-trade union-company owner relationships is much healthier in Germany than here. Simply because Thatcher has almost killed the trade union movement, has not improved the equivalent relationship in Britain.
      I cannot but find your comment so “ethnocentric”. It would enormously help if politicians of all hues were stopping to always consider the British way of doing things as “the best in the world”.

      • Mark B
        Posted October 30, 2014 at 7:26 pm | Permalink

        Lady Thatcher was NOT responsible for the demise of the Unions, the Unions did it to themselves.

        Clearly you never grew up in the UK through the 70’s, otherwise, you would not have come out with that tired, worn and thoroughly incorrect statement.

        • Mondeo Man
          Posted October 31, 2014 at 6:46 pm | Permalink

          Mark B – What bothers me is that (post unionisation) compliant workers got shafted – particularly in manufacturing, many of whom weren’t in the slightest bit militant.

          Those workers had to compete with people on benefits (which grew under Mrs Thatcher) for their housing and food and so became uncompetitive. They were also subject to a ruthless City which sold them out unpatriotically.

          We are told that Mrs Thatcher did not close the mines but simply withdrew subsidy from them ( a worthy aim) but those communities remain and they ended up more subsidised than ever – the Shameless (generation to generation) benefit culture.

          And so it goes on. Our world famous benefit culture which has ’em massing at Calais – and our workers unable to compete for housing and resources with those protected by the state through benefit-to-landlord accommodation.

    • Richard1
      Posted October 30, 2014 at 3:58 pm | Permalink

      Reply to JR’s reply to Gary: Germany has of course hugely out-performed the UK in the period since WW2. She was never hampered by such high taxes, high inflation and union militancy as the UK suffered until the great Thatcher Recovery of the 1980s. Germany was lumbered with a massive cost from re-unification, though then put through robust supply side reforms in the 2000s. More recently Germany has suffered from a terrible plague of green crap. Its a tribute to the massive strength of the German economy that its done as well as it has to date given some recent policy!

    • forthurst
      Posted October 30, 2014 at 4:52 pm | Permalink

      “Reply Then why has the German economy performed worse than ours? Why aren’t Germans a lot richer than us?”

      Germany has the highest energy costs in the EU as the result of green crap and Merkel closing down her nukes, consequently BASF has announced that it will not be expanding in Germany but in the USA; furthermore, Germany is significantly dependent on their export trade to Russia which Merkel has agreed to hamstring on instuctions from the neocon warmongers.

      Germany like the UK would be better off outside the EU where they would not have to continually bankroll ClubMed with the excess profits they make from the artificially (for them) cheap Euro. Both our countries would be better off trading with whom we want including Russia without neocon supervision; at some point Germany and the UK will need to cleanse their countries of occupations of US forces.

      As to comparing house rental with house purchase, it entirely depends on the relative legal frameworks between Germany and the UK; in the UK, rental is extremely insecure and expensive, which is not the case in Germany, whereas housing investment in property bubbles are treated by banks as secure investments and those in default on house purchase are not automatically foreclosed under instructions from the government.

      • A different Simon
        Posted October 30, 2014 at 6:04 pm | Permalink

        If you live in a democracy where the majority are owner occupiers , Govt policy is going to be skewed towards house owners .

        If you live in a democracy like Germany where the majority rent , Govt policy is going to favour renters .

        Your last paragraph says so much . What is going to happen to the banking system when the UK housing bubble pops as it must because eventually the electorate will have to start putting realistic amounts of money away for old age ?

        Perhaps this is and the encouragement of foreign investor buyers is all about protecting the banks from their follies . Everything else seems to be .

        • A different Simon
          Posted October 30, 2014 at 6:05 pm | Permalink

          PS , how long before the Govt enshrines bricks and mortar by offering Govt backing to equity release schemes or even offering it’s own ?

    • acorn
      Posted October 30, 2014 at 4:58 pm | Permalink

      The German economy has not performed worse than ours. The UK economy just happens to be accelerating slightly faster, because it is coming out of a much deeper recession and much later than the German economy; thanks to Mr Osborne.

      German GNI per capita is nearer $45,000. The UK is a bit less than $36,000. Remember that about 10% of UK GDP now goes back to foreign owners. Alas, not as bad as Ireland where 25% of its GDP goes offshore to foreign owners.

      Reply ONS comparisons show UK consumption per head slightly higher than Germany, and wealth per head usefully higher. The latest UN per capita figures for GDP are Germany $41 376 and UK 39 376 (2012) since when UK has grown faster.

      • A different Simon
        Posted October 30, 2014 at 6:21 pm | Permalink

        Germans believe they have a future so save for it .

        Britons know they have no future so live for the moment .

        The quality of living has got really rubbish in the UK John . It used to be pretty good 20 years ago .

      • acorn
        Posted October 30, 2014 at 6:24 pm | Permalink

        Consumption per head = Financed by Household sector Debt.

        Wealth per head = Massively overinflated house prices at £5,900 billion.

        Thanks to globalisation GDP (Gross Domestic Product) is increasingly becoming a poor measure of national wealth. For instance, Ireland has a GNI (Gross National Income) of circa $48,000.

        It gets this by attracting foreign companies to take advantage of its Corporation Tax tricks it works with the Dutch. Hence, Ireland’s GNI at $35,000, is a lot less than its GDP.

        Some of us, (red hot at econometrics you should be advised), expect the UK economy to move towards the Ireland model, if UK economic management continues with the current ideological paradigm.

      • zorro
        Posted October 30, 2014 at 8:28 pm | Permalink

        Consumption higher in the UK? Maybe…… But what about saving and investment ratios by Germans in their own country’s economy as opposed to the Brits in their own….. Doesn’t look so good then for the Brits…..

        zorro

    • petermartin2001
      Posted October 31, 2014 at 12:41 am | Permalink

      The Germans don’t live as well as many think they do. Even in the days of their so-called economic miracle many German families lived in quite poor rental accommodation by UK standards, but may well have had an expensive car parked in a communal car park.

      The German economy has also been based on the fallacy that exports are a net benefit to an economy when in fact they are a net cost. The reason for exporting should be to provide funds for the purchase of imports. There’s no reason to run surplus after surplus, year in year out.

      When Germany had its own currency , the DM, this could only be achieved by creating DMs in large quantities to artificially lower its value and keep its exports ‘competitive’. That of course meant the German population had to pay more than they should ave for their imports and so were poorer as a result.

      Now that Germany doesn’t have its own currency the desire to run large surpluses causes big problems in the Eurozone and makes everyone poorer!

  2. Mark B
    Posted October 30, 2014 at 6:09 am | Permalink

    Good morning.

    Home ownership makes you a juicier tax cow. I mean, how many taxes throughout their lifetime, does a home owner have to pay, compared to that of someone just renting.

    Eg. If I owned my own home, and had to go into care, I would be obliged to sell it to pay for such care. If I just rented and had saving below the threshold, I would have my care paid for by the State.

    • lifelogic
      Posted October 30, 2014 at 11:11 am | Permalink

      Indeed that is why there should be incentives to buy as there used to be not additional taxes like stamp duty as now.

    • Mondeo Man
      Posted October 30, 2014 at 9:21 pm | Permalink

      The landlord pays taxes which are passed on to the tenant through his rent.

  3. Chris Rose
    Posted October 30, 2014 at 6:52 am | Permalink

    I take exception to the Chancellor of the Exchequer when he told us yesterday that we are ‘common criminals’ when we take steps to avoid paying taxes. I think Chancellors are criminals when they avoid their responsibly to ensure that every single penny of tax which they confiscate from us is well spent: better spent than we could spend it ourselves.

    It is far easier for chancellors to raise taxes than to buckle down to the relentless graft of reducing government expenditure. Taxes at present are far too high, but Government expenditure is about 20% higher than that and the gap is rising inexorably. It is our duty to resist paying taxes, otherwise we shall never see taxes reduced to reasonable levels, expenditure reduced and the Government’s books balanced.

    I do not condone law-breaking, but I do expect the Chancellor to have a better understanding of his job and of our democracy.

    • agricola
      Posted October 30, 2014 at 9:38 am | Permalink

      Absolutely bang on the nail. UK government spends our money like an unrestrained drunk. The list of their profligacy is too long to print, lets just say Dome to HS2 and all stops between.

    • Cheshire Girl
      Posted October 30, 2014 at 10:56 am | Permalink

      And while we are on the subject of Government spending, why did they think it necessary to match the first five million of the DEC Ebola appeal when they have already given 120 million. Anyone would think it was not taxpayers money they were giving away !
      It is one thing for the public to give to this appeal, but quite another for the Government to match donations. I expect we are only second to the USA in our support, but why do we have to be, when we are a small country and are told daily that we must save money?

  4. Narrow Shoulders
    Posted October 30, 2014 at 6:57 am | Permalink

    Funny money created by banks over several decades has brought us to where the UK finds itself now with two earner families sacrificing much to get on the housing ladder in the knowledge that government can not allow a sustained bust in property prices lest the whole economy crashes once more.

    Government subsidy of mortgages in recent years and its allowance for the population to rise unchecked while paying housing subsidies to the low paid has resulted in the resilience of the property market which should have corrected itself during the last recession. It did not and a generation will be priced out of ownership.

    Government is unlikely to aim for a realignment of prices to realistic levels in the short term but should be pursuing policies which wll prevent prices rising further for at least ten years. Taxes on second homes, lowering of benefit payments to private landlords, higher interest rates, building more affordable homes, stamp duty on sales not purchases, fewer people arriving, non occupancy levies and the removal of VAT on home improvements.

    • Mark
      Posted October 30, 2014 at 10:31 am | Permalink

      A series of very sensible recommendations, but shifting the payment of stamp duty to sellers makes no difference – the buyer simply pays a tax inclusive price, just as you do when buying something subject to VAT.

  5. JoolsB
    Posted October 30, 2014 at 7:32 am | Permalink

    What chance have our kids got of ever getting on the property ladder? Your Government’s decision to tax them an eye watering extra 9p plus interest out of every pound they earn for most of their working lives if they go to university will certainly put pressure on them when it comes to applying for a mortgage.

    I want to lob a brick at the telly when I hear our smug politicians telling us they don’t want to pass the debt onto the next generation when that’s exactly what they are doing, but as usual, only if they are English of course!

    • Narrow Shoulders
      Posted October 30, 2014 at 1:14 pm | Permalink

      How many of these kids actually need to go to University and incur debt?

      corporations should drop the mandatory degree criteria from their job descriptions and recruit from A level students for personality type and ability and then train for competence.

      Better all round for everyone and the skills shortage would be addressed without immigration.

      • libertarian
        Posted October 30, 2014 at 2:02 pm | Permalink

        Narrow S

        Most corporations don’t ask for degrees mandatory or otherwise, and in fact nearly all the new job creation isn’t with corporations at all but SME’s. Last months job survey data showed 2 things 47% of employers aren’t interested in ANY qualifications ( 20% of employers think academic qualifications are important but only a derisory 4% care what qualification it is ) what they want is a work ethic and attitude and whilst this is missing the skills shortage gets worse. 76% of SME’s report they will hire at least 1 new employee each in next 12 months. If that is real and they do do it that is another 2 million plus new jobs.

        Politicians forced people to stay at school too long….wrong strategy

        Politicians forced too many people into University ….. wrong strategy

        Politicians failed to support vocational training …. wrong strategy

        So I agree at least 40% of university students shouldn’t be there and shouldn’t be running up debts and by the way 21% and growing university graduates are taking up apprenticeships as a way into work when they graduate

      • JoolsB
        Posted October 30, 2014 at 3:16 pm | Permalink

        Totally agree but then of course there are still those who do have to go to university for their chosen profession. And for them, if they don’t decide to move abroad once graduated, to escape the crippling burden of debt this Conservative led Government has placed on their young shoulders, (England’s young shoulders that is), they will be paying a massive 9p EXTRA plus interest on EVERY pound they earn virtually from graduation to retirement. Trying to buy a house in the south nowadays is beyond their means for many already without this added discriminatory measure.

        It was Labour who brought in the ridiculous unsustainable 50% quota so why is it only the Conservative voting part of this so called union who are paying the price?

      • Margaret Brandreth-J
        Posted October 31, 2014 at 5:21 am | Permalink

        Sounds like the best solution and is indeed what we did or similar as children, however years later when that person knows their job very well , along comes a graduate who knows a lot less and gets a lot more money, parasites the one with working knowledge and causes conflict.I think the only solution is to ensure education and practical abilities go hand in hand.Practical abilities do not negate educational acumen in themselves but by being seen as task orientated ,and for the sake of categorisation institutions like to put types in boxes.

        • libertarian
          Posted October 31, 2014 at 12:04 pm | Permalink

          Margaret

          Now a days and for the last 10 years at least graduates have NOT entered the workplace and earned more than experienced colleagues. As I explained in my post above this has radically changed. A university degree ( other than where necessary to do the job i.e. medicine) is no longer top of the desired employee lists. And where a degree is needed in order to do the job recent grads do not earn the oft quoted myth of £40k on average

          • Margaret Brandreth-J
            Posted October 31, 2014 at 10:17 pm | Permalink

            This is not happening in my profession.

  6. Mondeo Man
    Posted October 30, 2014 at 7:39 am | Permalink

    “It is far better to look forward to your old age knowing by then you will own your home and not face a rent bill.”

    Nowadays young people are choosing between pension or home ownership – rarely are they having both. And where they have homes they are spending money kitting it out rather than on their pensions.

    This is a disaster in the making.

    Our young find SE homes unaffordable, yet foreign investors find them cheap and are snapping them up. There is a subtle difference between ‘high’ house prices and ‘unaffordable’ house prices. One indicates a increasingly wealthier population – the other a population which is getting poorer.

    High population does not equal high house prices – it equals unaffordable house prices, where wages are depressed and the population is largely unskilled and uneducated.

    Reply The new pensions system ensures many more save for their second pension.

    • Mondeo Man
      Posted October 30, 2014 at 7:54 am | Permalink

      There is also news that older people – under the new pension rules – will cash in their pensions to help their young onto the property ladder.

      So who wins ? The estate agents ? The tax man ? (Iniquitous stamp duties still untapered.)

      ALL generations are getting poorer and I think it was the property obsession that helped it along.

      Home owners using their property as a cash-point. Lenders creating funny money (debt) and causing our economy to crash on dubious property prices.

      The reaction of Government in keeping property prices up at all costs. The stupidity and selfishness of the older generation tolerating unfettered immigration so long as their precious houses rocketed in value.

      Properties in many areas are valued for sale (funny money value) way above their rental potential (real earnings value)

      So why are you, John, not worried about this mortgage recovery ? With people buying into a still overpriced market : the rent/price ratio ?

    • agricola
      Posted October 30, 2014 at 9:53 am | Permalink

      Pensions are a rip off in the UK, worth around 30% less than is possible in some European countries with the same investment. The industry and government have systematically ripped off the UK pension investor. Apart of course for MPs.

      As a schoolboy I would have been wise to invest in a Tiger Moth at £25.00 or a couple of Spitfires at about £10,000 each in 1950. A working Spitfire is worth around £2,000,000 now. Seven years ago a Ferrari Dino 246 could be bought for around £50,000, now worth around £200,000. I would say to any 18 year old entering the workplace or university, think long and hard before investing in anything the government is trying to sell.

    • Liz
      Posted October 30, 2014 at 10:27 am | Permalink

      Yes, why are Chinese investors snapping up starter homes here – I am sure we can’t in China? We seem to do everything we can to put our own population at a disadvantage sometimes and subjugate British interests to everyone else’s. Even renting is getting to unafordable in the South for people on modest incomes. I understand that the waiting list for social housing in a Berkshire town is 9000!

      • A different Simon
        Posted October 30, 2014 at 7:02 pm | Permalink

        In Malaysia foreigners can only buy houses in the upper price brackets .

        Ordinary houses are reserved for citizens .

        People used to criticise Dr Mahateer but he did a better job than any of our post war prime ministers .

      • Mondeo Man
        Posted October 30, 2014 at 9:09 pm | Permalink

        Liz – an interesting comparison with China. UK investors probably wouldn’t spend money on housing there. It proves that a high density population doesn’t equal a high house value/rich society.

        Those banking on mass immigration to keep house prices up are in for a rude awakening.

  7. Peter A
    Posted October 30, 2014 at 7:40 am | Permalink

    A healthy first- time buyer market, especially in London, would be helped by realistic stamp duty bands which would make it less prohibitive for people to move up the ladder. This creating more supply.

    It is refreshing to hear someone make the link between 2007/8 being the peak of consumption (often of the conspicuous type) and debt. It is incredibly frustrating to hear Labour constantly compare standards of living and the present cost index to 2007/8, or as they are allowed to term it, before the crash. Just as 130k mortgages a month in 2007 were fuelled by debt so were the unrealistic credit card fuelled living standards that Labour are allowed to get away with using as a comparison.

  8. bigneil
    Posted October 30, 2014 at 8:15 am | Permalink

    “Two earner couples are more common now” -they have to be to earn enough to be able to even think about buying a house. Yet thousands have rolled in here with kids in tow and stuck their hands out -to instantly be given housing, which the rest of us, through our taxes, pay for. The amount of taxes that is took from the English worker couple, stops them being able to afford to buy – while the new import to “our” country doesn’t have to worry about the roof over THEIR heads -automatically paid for, and maintained forever, by the very system that pays foreigners to come here, sit in their free house, and (enjoy having a family supported by benefits ed)
    John – (words left out ed) Who will be working and buying houses? -All those who will have took over will be still expecting their “never contributed to” benefits. This country is being destroyed. At least you will all go down in future history books as the people who brought about the destruction of a nation. Hope the fame is worth it and that your future generations in your family will be proud of you.

    Reply Many migrants come here to work, to become citizens and the pay their taxes like anyone else.

    • Brian Tomkinson
      Posted October 30, 2014 at 8:56 am | Permalink

      Reply to reply,
      Thereby adding inexorably to the ever increasing demand for housing.

    • Ian wragg
      Posted October 30, 2014 at 9:47 am | Permalink

      And many don’t.

    • A different Simon
      Posted October 30, 2014 at 10:06 am | Permalink

      Come off it John .

      Only those people consistently earning almost double the median wage pay more in tax than they use in services .

      If immigrants bring their family with them they are getting free schooling , free medical care ( no requirement to purchase health insurance)

      The UK gives them benefits when it is not required to do so because they are here subject to a requirement to be able to support themselves and if they ostensibly have children back in their own country the UK pays child benefit for them too .

      The supreme insult is that immigrants who work 10 years in the UK and return home will be paid a UK State Pension by a future generation of Britons .

      Today’s political establishment just won’t stop making financial commitments on behalf of future generations of Brits .

      Reply I do support regaining control of our borders and cutting numbers who come in. It is however wrong to argue that a majority of migrants make no contribution and pay no tax. Of course someone on low pay who receives income top up and housing support may well impose a net cost on the state.

      • Brian Tomkinson
        Posted October 30, 2014 at 10:24 am | Permalink

        Reply to reply,
        JR: “Of course someone on low pay who receives income top up and housing support may well impose a net cost on the state.”
        Can you explain why it is thought desirable to have such immigrants entering the country other than to enrich a small group of people at the expense of the taxpayer?

      • zorro
        Posted October 30, 2014 at 10:46 am | Permalink

        Reply to reply – Really John? What do the numbers tell you? Firstly you post a false argument… Who on this blog has said ‘a majority of migrants make no contribution and pay no tax’? I think that it is only you in your reply.

        What people are saying is that a large number of migrants are paying little if any tax compared to the top up benefits that they are eligible to receive now or inthe form of pensions later.

        It really does not pay to try and present arguments like you have here. People are well aware of the numbers coming in and the proportion of low paying jobs being created, and resultant loss in tax incomes.

        zorro

        Reply It was a response to the implications of the incoming comment!

        • Narrow Shoulders
          Posted October 30, 2014 at 1:23 pm | Permalink

          Reply to reply

          Many of us out here want the lie that Mass immigration is a contributor to the economy stamped on. Yes the revenue of the economy may rise but the income reduces through paying for services used by the majority of immigrant and the costs to those already here of the immigrant’s consumption (whether that be increased inflation or paid for services).

          Immigration does not benefit the economy on any measure that I as someone who has to survive in the economy recognises. If we trained and used our own we would be better off.

          • Leslie Singleton
            Posted October 30, 2014 at 3:48 pm | Permalink

            Shoulders–Agreed– The idea that we cannot manage without immigration is with few exceptions fatuous. It is true that there would have to be a considerable re-equilibrium period but so what? Once attained the new equilibrium would obviously involve fewer out of work and low pay as known today would scarcely exist. Look at the results of the Black Death including the Statute of Labourers immediately afterwards.

          • Hope
            Posted October 30, 2014 at 4:27 pm | Permalink

            Asylum seekers encouraged by the Blaire govt. we were swamped from 2000 onwards. I was at a meeting when the service provider claimed the govt did not know how many were coming in but the SE were overwhelmed and needed to distribute around the country! Was this true? And how much did they contribute? How about the Home Office unable to deport criminals at the moment. Charles Clarke resigned and Reid claimed the HO was not fit for purpose, 8 years on and no progress. When is May going to resign? This is on top of migrants. And even today there is no reliable way of counting people in or out the country therefore no one can say with certainty whether the majority contribute or not. The govt needs to get a grip as it is paid to do by the taxpayer.

            Osborne needs to think before he insults the tax paying public about taxation or the avoidance of it. When he acts responsibly and severely cuts public spending then we might start to listen to him. He must go down in history with Brown as the biggest waste of space to occupy the Treasury.

          • A different Simon
            Posted October 31, 2014 at 10:38 am | Permalink

            Teresa May is an appalling MP pretending badly to look after UK citizens interests whilst facilitating a stream of cheap labour from abroad to help her big business friends .

            Doesn’t seem to care much for liberty either .

            Some MP’s have fooled me but I was never taken in by her .

      • A different Simon
        Posted October 30, 2014 at 11:45 am | Permalink

        Most of them make a contribution John but it is not enough to cover the visible costs of having them let alone the hidden ones .

        There are many Britons who didn’t do well at school and are only able to do low paying jobs .

        These are the people who have suffered most due to mass immigration and the affects on their families have been devastating and dare I say criminal .

        We must include their unemployment (and housing benefit) when doing a P&L for immigrants .

        Even with a points system which would be a big improvement on what we have now , immigration of even desireables has to be limited if one is to preserve the price signals in a market .

        What should happen when demand exceeds supply is that :-
        – wages should rise due to demand exceeding supply
        – people invest in order to satisfy the demand (eg pay £50k for a degree course)
        – people get a job and reap the rewards of their investment , extinguish the debt involved in their investment .

        The market cannot function if the Government fast tracks ICT Visa’s on an industrial scale and allows unlimited immigration from the EU .

        • Iain Gill
          Posted October 30, 2014 at 6:46 pm | Permalink

          Re “The market cannot function if the Government fast tracks ICT Visa’s on an industrial scale and allows unlimited immigration from the EU .” spot on. And gives them access to indefinite leave to remain and British passports simply for working here a while. And gives the spouse rights to work. And gives the entire family free healthcare regardless than many come in precisely when they need expensive treatment for that very reason. And gives them free schooling. And allows the much easier access to work visas than Brits get in their home country. And taxes them much less than native workers.

          Anyone would think the political class were being wined and dined and having donations from the outsourcers making a fortune ripping the British economy off like this. But then they are…

        • Mondeo Man
          Posted October 30, 2014 at 9:29 pm | Permalink

          Simon – “Most of them make a contribution John but it is not enough to cover the visible costs of having them let alone the hidden ones .”

          Because they are unchecked and not subject to selective immigration we can’t possibly know.

        • David Price
          Posted October 31, 2014 at 6:48 am | Permalink

          Re Simon’s comment … “There are many Britons who didn’t do well at school and are only able to do low paying jobs .

          We must include their unemployment (and housing benefit) when doing a P&L for immigrants .”

          This is a key point that is usually avoided as a costs of immigration – one incoming migrant who takes a low paying job means there are two people on benefits before you include their dependents and additional drains on the public purse. When you take all associated costs in to consideration I would expect very few to justify their migration/immigration.

          It would be useful to know what the break even wage level (the loaded labour rate) is when an immigrant starts positively contributing to the economy, I would expect it to be higher for the lower paid occupations where more benefits are paid.

          • margaret brandreth-j
            Posted October 31, 2014 at 10:51 am | Permalink

            And more to the point any Briton who did not do well at school should not be penalised for the rest of their life. Learning is a life long pursuit. Many now with higher degrees and Phd’s did not do well at school.
            When I was a teenager we could take maths or english; I preferred English Years later it was assumed that I could not do maths when in actual fact I have been tested many times and excelled.

          • A different Simon
            Posted October 31, 2014 at 10:58 am | Permalink

            David Price ,

            The world economy has become such a farce and money has lost all semblance of reality that I don’t even think the financial costs of immigrants are important – compared with the human costs .

            We have a sovereign currency and sufficient residual status in the world to run off a bit more whenever we need it .

            One of my relatives used to work in hotels and the impact on his family from being unable to compete with over qualified younger immigrants has been totally devastating .

            I do my best to help them financially but am unable to do enough .

            It appears that even some leftie socialists are questioning whether their freedom of movement dogma is really a good idea as even they are being forced to face up to the damage it does to British poor .

    • Denis Cooper
      Posted October 30, 2014 at 2:21 pm | Permalink

      Those who think that mass immigration is a jolly good thing, and maybe it is even essential, are entitled to their point of view. Personally I would like to strip some of them of their right to vote on the grounds that they have no loyalty at all to this country and its people, and therefore they should have no hand in government, but that is just my extreme fantasy which I know could never be put into practice even if on calmer reflection it still seemed a reasonable idea in what is supposed to be a free society. However those who think that mass immigration is far from a jolly good idea, and maybe it even amounts to the stealthy theft of our country from its people, are also entitled to their point of view. So how about we put it to a national referendum, when each of the citizens of this country would be formally invited to express their own view on how much immigration they thought would be appropriate, with elected members of our Parliament then paying attention to what the citizens had to say rather than dismissing anybody who is against mass immigration as an inferior being whose opinions should be disregarded?

    • fedupsouthener
      Posted October 30, 2014 at 7:27 pm | Permalink

      Reply to John. Many foreigners don’t come and work and buy their own homes or rent. They come and get everything for free while my son can never hope to buy or even rent at the moment. He is still at home like many others who have no hope of ever living on their own. Too many immigrants are coming and taking social housing and taking up too many school places too. The papers are reporting that some schools in some towns cannot cope with the number of immigrants and that there is a shortage of school places. What about all the illegal immigrants who have come here? Are they working or claiming benefits? If the government has failed to send them back home then how are they existing? My guess is a lot of them are on benefits and many of them have numerous children.

      • Narrow Shoulders
        Posted October 30, 2014 at 8:12 pm | Permalink

        Hillingdon is boasting that it has invested £150 million in new primary school places. Well done for reacting to need but why?…….

        If immigration truly is a net contributor does Hillingdon need to invest £150 million that would not be needed without immigration?

        Are my children threatened by not getting in to our secondary achool of choice which was previously undersubscribed even though it is judged outstanding?

        Policy for business, not for the demos.

  9. Ian wragg
    Posted October 30, 2014 at 8:23 am | Permalink

    While you keep importing half a million foreigners every year there will be a housing shortage. Your policy would require at least 150,000 units to be built annually
    This is unsustainable but our rulers are too stupid to see
    This also increases power demand and puts pressure on schools and the Nhs.
    Then you wonder why people are voting ukip.
    Deluded souls the lot of you.

    Reply It’s not my policy! I am trying to get control of our borders back from the EU.

    • Brian Tomkinson
      Posted October 30, 2014 at 8:44 am | Permalink

      Reply to reply,
      It is your party’s policy (despite pledging to reduce net immigration to the tens of thousands before the last election) and you keep supporting them and only yesterday you told us that: “I believe a Conservative majority is in the best interests of the c0untry.”

      Reply Yes I do believe that. I think it is in the national interest to have a government that cuts the deficit, lowers taxes on working people, negotiates a new deal with the EU and gives us a vote on EU membership. I do not see any other possible government in May 2015 that will offer that combination. All other likely governments will offer no EU referendum, further transfer of powers to Brussels, higher taxes and less prudent national finances. Each voter has to consider this carefully. Protest votes do not give you the government you want. You may feel better for a day but then have to spend 5 years saying “I told you so” as you see the opposite happening to what you wanted.

      • Brian Tomkinson
        Posted October 30, 2014 at 9:03 am | Permalink

        Reply to reply,
        JR: ” then have to spend 5 years saying “I told you so” as you see the opposite happening to what you wanted. ”
        I am very familiar with that feeling after voting for your party in 2010!

        • zorro
          Posted October 30, 2014 at 10:51 am | Permalink

          I am sure any one who follows the same course in 2015 may get that ‘groundhog day’ feeling looking at the percentages….

          zorro

          • Hope
            Posted October 30, 2014 at 4:34 pm | Permalink

            JR, what you claim about Labour is what we got from Cameron and his govt. You have made the points on the failure to act on the economy so often from 2010. MEPs rejected the budget cut, EU arrest warrant, UK taxpayers’ money wasted by Cameron on ever closer union, nothing in return for treaty change to allow bail outs. Over 300 tax increasses. National financial prudence? HS2, energy policy etc. The list of failings is endless. There is no difference between Labour and Tory.

        • Mondeo Man
          Posted October 30, 2014 at 9:39 pm | Permalink

          Reply to reply – It’s not a Labour govt getting in and the “I told you so” scenario becoming reality.

          It’s the feeling of regret I’ll have if I help to elect Mr Cameron and then he continues to treat us as chumps and none of the promises come to fruition.

          I’m going to vote UKIP because I really want to.

          I am no longer a Tory supporter. The thought of putting a cross by Conservative makes me feel physically ill.

      • agricola
        Posted October 30, 2014 at 10:03 am | Permalink

        I see one alternative possibility. A conservative government in coalition with a sizeable UKIP intake to ensure that we actually get a conservative government. No need to pursue all the re-negotiation fog which will not happen in any meaningful way under a conservative only regime. Perhaps we could then see government cut down to half it’s current size and the DEBT falling pro rata.

        Reply Just remind me how UKIP would halve the size of government.It would be interesting to see the list of cuts.

        • agricola
          Posted October 30, 2014 at 10:58 am | Permalink

          Reply to Reply.
          There are two errors in your reply.
          1. It would not be a UKIP answer but a Conservative UKIP answer to cuts.
          2.Your assumption would seem to suggest that you are happy with the size of government, what it costs and that the working population have to pay for it by working around five months of the year for free. I do not accept your premiss so here are a few things to look at.

          Overseas Aid £9.0 Billion
          EU Membership £12.0 Billion and countless other impositions that membership entails.
          Welfare Budget £160.0 Billion
          The “Bonfire of the Quangoes” that never happened.
          Various Ministries,
          Business and Innovation Skills. Government cannot even buy economically for the NHS and innovation is best left to innovators.
          Education. Best left to schools to run, no need for a top heavy ministry of education who have consistently since 1960 screwed up the education of the great mass of pupils..
          Energy and climate change They could not have sewn the seeds of disaster more effectively than they have.
          Competition and Markets Authority. The market place provides the competition not government.
          Food Standards. Their monument to success is the second most obese population in the World. They could not even keep horse meat out of the food chain, described as beef of course.

          Well there is a start for you John I am sure there are many other possibilities.

          Reply I want the state to elimi8nate its deficit and have set out ways I would reduce spending. I was querying your or UKIP’s view that it can be halved as I do not think that possible. You have not told me what part of the welfare bill you would cut for example.

          • agricola
            Posted October 30, 2014 at 2:42 pm | Permalink

            Since you insist,
            Housing Benefit £16.94 Billion
            Income Support £8.11 ..
            Rent Rebates £5.45 ..
            Job Seekers allowance £4.91 ..
            Council Tax benefit £4.83 ..
            Employment Support £3.58 ..
            Social Fund ? £2.37 ..
            Financial Assistance £1.24 ..
            Debt Interest £48.2 ..

            The debt interest suggests an unbelievable level of borrowing. Is it to pay for under funded state section pensions which I would suggest be a thing of the past because they far exceed anything people can expect in the private sector. Why don’t they pay for their own pensions just like the private sector. The problem is that you politicians invented state pensions , did not invest the income from the NI contributions, expecting next years NI contributions to pay for this years retirees. Rob Peter to pay Paul. Add some of these reductions to my earlier list and you might get the finances heading in the right direction. It is little wonder you have an immigration problem while offering such largesse.

          • Hope
            Posted October 30, 2014 at 4:39 pm | Permalink

            In work tax credits for a start, make it pay to work none of this average wage nonsense, child care vouchers, child allowance sent abroad, prevent abuse of the world health service by citizens of the world, no human rights nonsense, overseas aid, not allowing the EU to spend a sixth of it. I am sure you look back at your blogs and think of many more failings of your party that could be changed to make savings on the UK taxpayer.

          • lifelogic
            Posted October 30, 2014 at 4:49 pm | Permalink

            All of welfare need to be cut or restricted significantly as does the pay of the state sector which is 150% of that of the worker bees. Half the stuff the state does is of no, little or negative value anyway.

            All the free crap and ott building regs for a start.

          • Brian Tomkinson
            Posted October 30, 2014 at 5:17 pm | Permalink

            Reply to reply,
            JR: ” I want the state to elimi8nate its deficit”
            Just as you, Cameron, Osborne et al said you would do before the 2010 election. I seem to remember too that Alistair Darling’s target of a 50% reduction was derided and yet you and your colleagues have not even matched it.

          • fedupsouthener
            Posted October 30, 2014 at 7:31 pm | Permalink

            Stop paying out tax credits for people to work part time hours but getting full time pay. Who pays for this? Answer, the tax payer who is working full time. People in part time work with children are better off than those working full time without children and it isn’t right. It encourages people to have more children when they cannot afford it on part time hours but as the tax payer is paying them it is a good little earner.

      • libertarian
        Posted October 30, 2014 at 2:14 pm | Permalink

        JR

        The problem is that the Conservative party has been making low tax, small government less EU promises for the last 30 years. I haven’t got any time left to wait for them to actually do it. So whilst the Tories have relied for many years on a strategy of “we’re not as bad as the other lot” ifs now run out of steam. The Conservative Party no longer has mass membership, no longer commands its headlands of the South East of England and is not trusted with the economy any longer either.

        As an electorate we have 2 choices.
        1. keep on voting the same way and keep on getting let down

        2. Vote differently and completely disrupt the political scene for a couple of years in order to clear space for a new approach to establish itself.

        Me I intend to vote differently, it matters not a jot to me whether Cameron, Clegg or Miliband are supposedly in charge. We’ll still be run by the EU any how. This is our chance to radically change the political landscape

        • libertarian
          Posted October 30, 2014 at 2:15 pm | Permalink

          That should read ‘heartland” damned auto correct

          • Margaret Brandreth-J
            Posted October 31, 2014 at 10:37 pm | Permalink

            Rather stupid tactics, and why if you vote for a minority , it will be wasted vote.It may satisfy you own perceptions of the world, but this is reality.

        • Lifelogic
          Posted October 30, 2014 at 6:08 pm | Permalink

          Indeed Miliband will clearly be worse than Cameron, he is after all the voice of the state sector unions. But only a little worse, and it will be far better than watching Cameron dissembling, ratting & treating his supporters with his total contempt for a second time.

        • fedupsouthener
          Posted October 30, 2014 at 7:35 pm | Permalink

          Too right. We need change even if it is only to give our 3 main parties a kickstart.. Let them see we are fed up with no action over things the electorate has been moaning about for a long time. Immigration, energy policy, overseas payments, running down the armed forces and paying people to not work. Make people do a days work or stop paying their benefits. I keep hearing how foreigners are the only people prepared to do some of our low paid jobs – well make the jobless do them and stop their benefits if they refuse. Their beds are too comfortable.

      • Narrow Shoulders
        Posted October 30, 2014 at 8:18 pm | Permalink

        Reply to reply

        There is little in your government that I find Conservative. I do understand that it is a coalition but we have witnessed much more tax, interference, powers and money transfered to EU, spending and social engineering than is my understanding of Conservatives who make the majority.

        The tail only wags the dog when the dog is satisfied for that to happen

      • Kenneth R Moore
        Posted October 30, 2014 at 10:18 pm | Permalink

        The whole point of the coalition was to tackle the deficit left by Labour and save money. They failed miserably, decisions were ducked and our finances are in a terrible terrible mess. The borders are more open than ever.
        Border police force – what happened to that ?
        Really Dr Redwood, your party doesn’t deserve a second chance – in your heart you must know Britain deserves better than the modern Conservative party.

    • Mark B
      Posted October 30, 2014 at 10:33 am | Permalink

      Reply to reply

      And what about non-EU immigrants ? There is something that you can do about that, isn’t it ?

    • Iain Gill
      Posted October 30, 2014 at 6:48 pm | Permalink

      John you support a government which has lied about bringing immigration down to the tens of thousands. Which continues to print ICT work visas like confetti. Please be realistic about your own position.

  10. Margaret Brandreth-J
    Posted October 30, 2014 at 8:24 am | Permalink

    Many people including myself have had to price down by a large amount for a sale , so that in itself should help those trying to get a mortgage.

    A question to all those legal minds out there and a little off topic.

    Is it legal to sell a’ person’ working in one sector to another sector without the person knowing. Is this type of slavery legal?

    Reply An employee is not a slave. You have an employment contract which is enforceable, and a wide range of rights . It has always been legal for companies or other institutions that employ people to change their ownership, transferring the staff from one owner to another with the same contract for each employee as before.

    • margaret brandreth-j
      Posted October 30, 2014 at 10:16 am | Permalink

      reply to reply.
      If the NHS sold of its staff, thereby disallowing NHS staff to work in that sector and did not inform that person of the circumstances , is this legal ?
      If behind the scenes someone bids for a worker without them knowing and takes them on to get a profit out of them. Is this lefal?

      • margaret brandreth-j
        Posted October 30, 2014 at 2:12 pm | Permalink

        Does relocation in consultation with the trust mean that the buyers and the NHS consult without the knowledge of the trust?

        When disallowed to work for the NHS due to another buyer and not informing them is it legal to let them attend 100’s of interviews to retain a post , paying for interviews and presentations around the countryin the knowledge they are not going to get that post . Is this legal?

      • libertarian
        Posted October 30, 2014 at 2:18 pm | Permalink

        Margaret

        Of course it isn’t legal and never has been. You can’t sell staff you sell the organisation they work for and therefore their contract. You’ve obviously not heard of TUPE

        http://www.acas.org.uk/TUPE

        • Margaret Brandreth-J
          Posted October 31, 2014 at 4:32 am | Permalink

          Thanks I am talking about 1995 and what is more it was allowed to happen even though I took them to an industrial tribunal.This selling off of staff and duplicity of contracts has ruined my professional life. When a City is doing the same thing over an over again and the legal bodied are involved , the individual ha no choice. More recently I have been transferred by TUPE, but was almost forced to sign another contract. This recent manoeuvre is not main problem

          • libertarian
            Posted October 31, 2014 at 12:15 pm | Permalink

            Margaret

            Its never been allowed. You are confusing different things which is why you probably lost the industrial tribunal.

            Part of the TUPE process IS to get a new contract protecting your continued employment rights. You are very confused about this. All of the things you seem to object to are for YOUR protection. You just seem to not like a new company taking over. Well you don’t have to work for them

          • Margaret Brandreth-J
            Posted October 31, 2014 at 10:22 pm | Permalink

            No you are confusing different things. The events I described occured in 1995. The TUPE transfer occured in 2012.D o not try to be so clever.

    • Lifelogic
      Posted October 30, 2014 at 6:10 pm | Permalink

      No one forces anyone to work to someone. It is up to them whether they turn up or not.

    • Iain Gill
      Posted October 30, 2014 at 6:51 pm | Permalink

      Your rights count for little if you are here on a work visa tied to working for a specific employer. You can exercise your rights but you will soon find yourself not entitled to be in the country, out of work, children with no schooling, family not getting any medical treatment, and so much more. As an easy example of why these rights are often not worth the paper they are written on.

  11. Lifelogic
    Posted October 30, 2014 at 8:24 am | Permalink

    Indeed if you are going to have open borders as Cameron types clearly want then we clearly need to build more homes. Daft planning laws, over the top “green” building regulations and over expensive utility connections make them more expensive than they need to be. Over the top mortgage regulations and lack of competition in banking make mortgages too expensive too.

    Expensive houses, bank margins and expensive offices/factories make labour more expensive too and make industry less competitive. Hence much of the UK’s poor productivity. Nearly all is the fault of bloated, incompetent governments and over taxing and regulating governments running open borders to boot.

    • Lifelogic
      Posted October 30, 2014 at 8:41 am | Permalink

      Yesterday I drove about 75 miles in London, nearly all on dual carriage ways and motorway (the North circular and M25). In total over 3 hours so averaging under 25 mph. What about providing a few high speed roads instead of this huge road under capacity and obsession with HS trains & bikes? It would have been even slower by train/tube/bus with all the connections.

      • willH
        Posted October 30, 2014 at 9:17 am | Permalink

        True Lifelogic, if the HS2 money was spent on the roads it would benefit far more people, as to HS3 extending the M67 to Sheffield from Manchester would be of far more use, relieving the M1 through Yorkshire and the M62 over the Pennines.

      • lifelogic
        Posted October 30, 2014 at 11:16 am | Permalink

        Millions of expensive people, assets and trucks wasting their time sitting in unnecessary jams. Using more fuel too in the process.

      • fedupsouthener
        Posted October 30, 2014 at 7:37 pm | Permalink

        Oh no, you can’t drive your cars, Ed Davey wouldn’t like it. Too many CO2 emissions being emitted!

    • Iain Gill
      Posted October 30, 2014 at 6:53 pm | Permalink

      Yea Cameron like Blair and Brown before him has been a complete open doors, cosy up to the big business which likes ready supply of cheap workers coming in, bend over and give foreign nations access to our jobs market while not fighting for Brits rights to work in the opposite country, slime ball because all the while they lie about bringing immigration under control which is just spin they have no intention at all of carrying out.

  12. British Nationalist
    Posted October 30, 2014 at 8:26 am | Permalink

    It would help first time buyers immensely if the government could stop inflating house prices with schemes like Help to Buy I & II, Support for Mortgage Interest, Lender Forbearance and the current record low interest rates.

    First time buyers should not be expected to pay off the profligacy of the previous generation, nor even provide them with a pension – they should have made their own arrangements during their working life.

    • formula57
      Posted October 30, 2014 at 9:22 am | Permalink

      But we need to see inflating house prices. It is what the British public expects and likes. Exchanging over-priced properties amongst each other helps foster the illusions that we are all rich and live in a buoyant economy. Folly surely to withdraw such comfort before it is forced upon us.

    • Narrow Shoulders
      Posted October 30, 2014 at 1:28 pm | Permalink

      And paying market rates to buy to let tenants.

      As a large purchaser of rentals it should be looking for at least a 25% discount which would cool the housing market no end.

      • Narrow Shoulders
        Posted October 30, 2014 at 1:28 pm | Permalink

        The government paying that is

  13. ChrisS
    Posted October 30, 2014 at 8:28 am | Permalink

    There is a commonly held view that house prices are less affordable than they have ever been.

    As a recently retired IFA, I can assure you that, outside London, this is completely untrue.

    Because of low interest rates, real affordability is well below the long term average. I can provide statistics to prove this is the case going back to the 1950s.

    The real problem is expectation :

    It has never been the case that a single person could afford to get on the housing ladder without a very high salary or a partner’s second income. Today many singkle people expect to be able to buy a property on one income.

    Also, these days, many young people expect to be able to buy a house as their first property. This is not realistic. Almost everyone started with a flat and worked up ( or down) from there.

    Thirdly, when they come for a mortgage, many young people now have substantial car loans or credit card debts that severely reduce their ability to borrow the funds necessary. Loans from University study are not usually a problem as lenders are more relaxed about those.

    In the 1970s most young people came for a mortgage with savings in the bank and were debt free.

    Finally, the help to buy scheme has made it much easier for those without parental resources to provide a deposit.

    So. young people wanting to buy need to be debt free, have a good credit record, be prepared to save for a period and be more realistic about the kind of property they can afford. They would then find it a lot easier that we ever did !

    • Mike Wilson
      Posted October 30, 2014 at 9:48 am | Permalink

      “So. young people wanting to buy need to be debt free, have a good credit record, be prepared to save for a period and be more realistic about the kind of property they can afford. They would then find it a lot easier that we ever did !”

      Utter nonsense. In the late 1970s I bought a maisonette in West London for £22k. I had an £18k mortgage and earned an average wage of £7k. 2.5 times my salary – with no partner’s salary needed – and I was the ‘owner’ of a flat which, now, would be priced at £300k. In 1979 the flat was 3 times an average salary – now it is 12 times.

      • margaret brandreth-j
        Posted October 30, 2014 at 10:44 am | Permalink

        In the early 1970’s I bought a detached house for £9,750 with my money and in joint ownership . The more fool me!

      • Know-Dice
        Posted October 30, 2014 at 12:01 pm | Permalink

        ChrisS did say “outside London”.

        My experience is the same as Mike Wilson’s and that’s in our esteemed host’s constituency…

        Purchased a two bed semi for £27,000 early eighties and that was about 2.5 times my salary. The same house last sold for £250,000 in 2010 which is 12.5 times my son’s salary 🙁

        Now if you are talking about “up north” it could be a different picture…

        • fedupsouthener
          Posted October 30, 2014 at 7:39 pm | Permalink

          Definitely different in many parts of Scotland. You can still buy a 3 bed semi for £60k where I live. Rents are around £400 for a 3 bed house. The Scots moan like mad but they don’t realise that the minimum wage is the same the UK over but down south it doesn’t buy as much.

    • oldtimer
      Posted October 30, 2014 at 9:59 am | Permalink

      Good to hear some facts. We were were well into our 30s before we could afford to buy a house – back in the 1960s – having rented before that.

      • Mike Wilson
        Posted October 30, 2014 at 10:32 am | Permalink

        They are not facts. They are nonsense. My eldest brother (born 1942) bought a 3 bed detached house (in Wiltshire) as his first home in 1972. He was an electrician. My elder brother (born 1948) bought his first flat – a 2 bed flat in West London in 1971. He was a TV aerial erector at the time. It was common when I was a young man – in the 1970s – for people to get married, and buy their first house, as soon as the man finished his apprenticeship. Couples used to get engaged and save ‘for their bottom drawer’. The first house was usually a 2 or 3 bed terrace. None of my friends were high flyers. We came from a working class area and most of them were tradesmen.

        • Colin
          Posted October 30, 2014 at 3:49 pm | Permalink

          In 1978 my parents bought a five-bedroomed semi-detached house in the south London suburbs for £26,000. Dad left school at 15 with no qualifications and worked as a telephone repairman – someone doing that job today earns about £27k, i.e. an average wage. Mum worked part-time as a cleaner. They sold the house in 2003 for £290,000. It’s probably worth the best part of £400,000 now.

          In contrast I went to Oxford University and became a barrister. Thanks to successive governments’ economic and legal policies, this is not the lucrative job many people think. I make about £30k a year. Even with a partner with a similarly-paid job and working full-time, there is no way in the world I could afford to buy the house I grew up in.

          I do not believe this is because of unrealistic expectations on my part. I did what was expected of me – worked hard and got excellent qualifications. Like many of my generation, I feel I have been conned.

      • james c
        Posted October 30, 2014 at 10:48 am | Permalink

        Oldtimer,

        You haven’t heard any facts. Housing is considerably less affordable now than it was when you would have bought your first property.

      • libertarian
        Posted October 30, 2014 at 2:29 pm | Permalink

        The one thing that people always overlook and I never see mentioned is this.

        Prior to 2000 there was a thing called MIRAS mortgage interest relief . i.e. One got a tax rebate against interest payments on a mortgage. Introduced in 1969 extended first to cover unto £30k then allowed as a joint mortgage to be pooled at £60k. Gordon Brown scrapped it in April 2000 and the housing market has gone from bad to worse ever since.

        Old Timer may have been right about the 60’s, but in 70’s 80’s and 90’s people tried to buy their own homes as soon as possible helped by the advantageous tax relief.

        Now that house prices are proportionally higher I would say its time that some form of tax incentive for purchase was put in place rather than the tax disincentives that we currently have.

        • Lifelogic
          Posted October 30, 2014 at 6:14 pm | Permalink

          Well at least remove stamp duty, turnover taxes are a bad idea anyway. At up to 12% they are absurd.

        • A different Simon
          Posted October 30, 2014 at 8:09 pm | Permalink

          Libertarian ,

          You have got it back to front .

          If tax relief is provided to encourage house purchases , prices will inevitably go up !

          To provide a negative feedback shift taxation from employment onto land via an annual location value tax .

          • libertarian
            Posted October 31, 2014 at 12:20 pm | Permalink

            A different Simon

            Don’t agree with you. The whole house price scenario is a mix of many different issues of supply, demand and location. I didn’t specify what kind of tax incentive should be given. MIRAS would be pointless as the reason it was stopped in the first place is so that Government could rig interest rates to enable it to borrow at ultra low cost and interest rates are vanishingly small at the moment and will remain so for some time

    • Richard
      Posted October 30, 2014 at 10:26 am | Permalink

      ChrisS :

      You are correct.
      Our current politicians have given our youth the feeling that they should each own a house in their early twenties, whatever their personal circumstances.

      In the early seventies, a couple of years after leaving university, I fixed an appointment with a building society branch manager in order to obtain a mortgage to purchase a flat.

      The only question the manager asked was :

      “Are you married or engaged to be married?”

      When I replied, “No”, he said :

      “Well in that case you can forget about obtaining a mortgage. Please leave my office”.

      • Mike Wilson
        Posted October 30, 2014 at 2:17 pm | Permalink

        ChrisS is not correct. It was harder to get a mortgage in those days – that is true – but houses were a lot more affordable. Of the kids I grew up with, I’d say 90% bought their own house. Of the kids my sons have grown up with, I’d say 95% have no chance of ever owning their own home – and those that do are the ones earning in the top 5% and whose parents bung them 50k to get started.

    • Mondeo Man
      Posted October 30, 2014 at 10:01 pm | Permalink

      Chris S – Disagree.

      Bought a London house for 3x my ordinary salary in the ’90s

      To buy back that same house (despite a top 10% salary and a massive deposit) would now cost me 6x my salary – up to retirement !

      London was NOT always unaffordable

      It’s not that much better here – 150 miles away. If I were to start from scratch I’d need around to borrow around 3x my present salary. In a ‘deprived’ post code for an inferior house to the one I bought in the ’90s.

      People on average wages here ? Not a chance.

      • Mondeo Man
        Posted October 31, 2014 at 7:15 pm | Permalink

        *Correction*

        I’m actually in the low 8th decile of earners – in the 7th decile of joint income earners. (Using The Guardian’s scale)

        Perhaps I’ve overstated the expense of housing. Since moving from London I’ve slipped a bit.

    • zorro
      Posted October 30, 2014 at 10:20 pm | Permalink

      ‘It has never been the case that a single person could afford to get on the housing ladder without a very high salary or a partner’s second income.’

      Again, utter nonsense….. I was able to buy a perfectly good one bedroom garden flat in West London (good area) in 1989 for £60,000 on a 3 x income mortgage and very small deposit.

      To do that now in the same situation would be utterly impossible. That is real life and not figures!

      zorro

  14. alan jutson
    Posted October 30, 2014 at 8:33 am | Permalink

    Ease and flexibility of moving home if you own ?

    Not with the present stamp duty rates.

    Then add on the usual estate agents and solicitors fees, and it cost between 5-10% of your house valve just to move to a similar priced property, more if you move up.

    • alan jutson
      Posted October 30, 2014 at 8:54 am | Permalink

      Oh almost forgot, mortgage redemption fees.

      The latest scam if you pay off, curtail, or finish your mortgage early.

    • oldtimer
      Posted October 30, 2014 at 10:03 am | Permalink

      We regularly consider downsizing. One major issue is the high cost of moving which, by my rule of thimb, is c£50,000. And that is before the hassle of finding an alternative home at a sensible price (per sq ft). So far we have concluded that the sensible thing to do is nothing, and to stay put.

      • james c
        Posted October 30, 2014 at 10:49 am | Permalink

        Oldtimer,

        It does not cost £50,000 to downsize.

        • libertarian
          Posted October 30, 2014 at 2:33 pm | Permalink

          Downsizing to a small house in South East of England at a purchase price of £250k will cost you between £20-£30 k in stamp duty, agents fees, legal costs and removals costs.

          • Lifelogic
            Posted October 30, 2014 at 6:15 pm | Permalink

            Indeed often being taxed at over 100% of your income for the year you move.

          • alan jutson
            Posted October 30, 2014 at 7:31 pm | Permalink

            Libertarian.

            .”..Cost between £20-30,000…”

            Exactly

            Then it is curtains and carpets etc etc.

            So actual figure is works out to be nearer £50,000 in the end.

    • English Pensioner
      Posted October 30, 2014 at 10:19 am | Permalink

      When I retired, we wanted to downsize to a smaller home of similar quality in the same general area not to far from our family. In practice, the difference in the selling price of our house and the purchase price of a smaller house would not have paid these costs, so we stayed put. We simply could not afford to downsize unless we were prepared to move well away from SE England.

    • Mondeo Man
      Posted October 30, 2014 at 9:52 pm | Permalink

      I don’t understand why estate agents are still allowed to charge as a percentage of house prices.

      An utter rip off.

      • alan jutson
        Posted October 31, 2014 at 9:09 am | Permalink

        Mondeo Man

        ..”a percentage of house prices”

        Certainly not defending Estate agents, but they do, because they can.

        Just like everything else in life, it is up to the customer to negotiate, or walk away if they feel the cost of the service is too high.

        When a family member (under my advice) sold their last house they agreed to pay the full percentage commission, but only if the agreed asking price was met in full by the purchaser.
        If not then an agreed reduced commission rate would apply, based on a decreasing sliding scale for anything less than the original agreed valuation.

        Result, house sold for the asking price !

        Anyone can giveaway a house, or anything else at well below market valuation.

        You have to make them work for their money, just like the rest of us.

        Worthwhile also offering a higher rate for anything above the original valuation, as an extra reward just to concentrate their minds.

      • libertarian
        Posted October 31, 2014 at 12:22 pm | Permalink

        Mondeo Man

        If you think estate agents are a rip off don’t use them. Plenty of cheaper alternatives these days

  15. acorn
    Posted October 30, 2014 at 9:44 am | Permalink

    Bring back “sub-prime” lending I say. We made loads-a-money out of the politicians demand for “affordable housing”.

    We,d sell a mortgage loan to some “Mark” at at “teaser rate” of 1% or so for a couple of years, that would balloon into three times that rate after. Naturally, the Mark was never going to be able to pay that so foreclosure was a certainty. So we took out insurance on the Mark going Bankrupt.

    Some of these loans were so toxic, you had to shift them off your book pronto. So we “securitised” them into bonds with a spread of toxicity in them. The more toxic, the higher the yield we offered. Naturally, we knew most of these bonds would implode within a couple of years, by then they would be held by the ignorant end of the market.

    With a lot of foreclosed property on the market, prices slump. So we got the guys in the next office to buy them up and flip them into the buy-to-let market and similar greed pits. Anyway, all the real crap got shifted onto government mortgage guarantee agencies like Fannie Mae and Freddie Mac which were bailed out by the US Taxpayers.

    Would you believe!!! On October 20th Mel Watt, head of the US Federal Housing Finance Authority (FHFA), announced plans to reintroduce mortgages with deposits as low as 3% through Fannie Mae and Freddie Mac. Time to get back into the money trough lads.

    PS. There are huge amounts of what Mosler calls “parasitic secondary market activity.”. That is, lots of Spivs adding cost and taking profits out of mortgage and other financial transactions. It would be easy; cheap; risk free and stable for the government (BoE ?) to operate its own mortgage lending facility, directly with Estate Agents and Housing Associations. There could be special offers for first time buyers; self builders etc. It would fix an interest rate for new mortgages to warm up or cool the bubble prone UK residential housing market.

    • libertarian
      Posted October 31, 2014 at 12:29 pm | Permalink

      Acorn

      As you completely fail to understand how mortgages where securitised I think we can safely ignore your post.

      One of the major reasons that sub prime mortgages caused such a problem in the US is exactly that the securitisation did NOT allow you to understand what was toxic and what wasn’t.

      You then laughably suggest that the BoE should offer mortgages, what you mean like the US government did which actually caused the problem.

      By the way there was and is a vanishingly small market in sub prime mortgages in the UK, this is primarily a US based problem.

      The selling off of mortgage books by people like Northern Rock had nothing to do with the mortgages being sub prime

  16. Mike Wilson
    Posted October 30, 2014 at 9:45 am | Permalink

    “Two earner couples are more common now, and greater account is taken of both incomes in mortgage calculations.”

    ‘Twas ever thus. Governments, congenitally incapable of managing the economy, allow the banks to lend more into the housing market creating a temporary boom while people borrow more and spend their equity. And, because a house price crash or correction causes a recession, governments do everything in their power to prevent these.

    The result is a generation now priced out of housing. And no politician has any idea what to do except bleat about ‘more housing’ – which no-one wants in their own area.

    325k for a 3 bed terrace on the Woosehill estate in Wokingham. Well done. What a fantastic achievement from successive governments to make a modest family home ‘worth’ 13 times an average salary. Any young people aspiring to own their own, modest home will need a mortgage of several hundred thousand pounds. Both parents will need to have good jobs and work all the time – children will be dumped in nurseries because, unless one of the parents earns 100k – there is no way a mortgage like that can be paid.

    As for what happens when, one day, mortgage rates go back up to 8% … half the houses bought in the last 10 years will be repossessed.

  17. Brian Tomkinson
    Posted October 30, 2014 at 10:06 am | Permalink

    JR: “To have a healthy first time buyer market there also needs to be a sensible balance between new home construction and additional people seeking accommodation.”
    Unfortunately, the three main parties currently in Westminster only see the supply side of the equation, promise to build more new houses and fail to do it. The demand caused by immigration is still taboo.
    The same pressure is seen in education, as the Daily Mail reports: ” Schools are struggling to cope with an influx of migrant pupils, the head of Ofsted said yesterday.
    In a rare intervention, Michael Wilshaw warned that schools needed more help to deal with growing numbers of foreign- language children.
    ‘When they’re faced with an influx of children from other countries, they need the resources and capacity to deal with it and if those resources aren’t there, that’s a big issue for government,’ he said”.
    The same is true in the health service.

  18. English Pensioner
    Posted October 30, 2014 at 10:12 am | Permalink

    I know us oldies are fond of saying that things were so much better in the old days, but when it comes to house buying, I’m not sure that this is entirely true.
    At the time we bought our first house, the main source of finance was Building Societies, and most insisted that you were a member and saved with them for a minimum of a year before they would even consider you for a mortgage. Many required you to save a sum each month equivalent to your likely mortgage payments, not easy if you are also renting a place, as we were. This, of course meant that you had little choice of a mortgage provider unless you were earning enough to have savings accounts with more than one Building Society. The usual mortgage limit was 2½ times your salary, but one’s wife’s income was not counted, and the maximum period was 25 years. I think that a minimum of 25% deposit was required. Interest rates were far higher, I don’t think they fell below 8% during the period of my first mortgage, and at one time they went up to something like 18%.
    OK, House prices were lower as there was less demand from a smaller population, but then so were salaries.
    Even so, most most of us had great difficulties in affording a home, it was just that we faced different problems from buyers today. As the saying goes “Be careful what you wish for”.

  19. A different Simon
    Posted October 30, 2014 at 10:12 am | Permalink

    Is it to cynical to think that the CBI’s main reason for trying to destroy work place pensions was so that the money could be directed towards mortgage lenders instead ?

  20. NickW
    Posted October 30, 2014 at 10:23 am | Permalink

    The new student loan system and increased tuition fees mean that a three year course outside London with a loan for maintenance will result in a total debt of £39,000.

    According to the Government website, a graduate earning £45000 per year will currently be charged an interest rate of 5.5% and the (deducted by employer) repayments will (according to the data on the website), just be enough to pay off the interest on the loan without touching the capital. I know of no employment which offers new graduates £45000.p.a.

    https://www.gov.uk/student-finance/overview

    Note that the interest rate is linked to the RPI which makes it impossible for the debt to be reduced by inflation.

    Low earners will make no repayments, but interest will continue to be added, which varies between RPI and RPI +3% according to salary.

    After 30 years the loan is written off, but by that time, at 5.5%, the debt will be around £200,000.

    What all this means is that from now on, graduates will be effectively barred from the housing market because of their student debts. Graduates who cannot ever afford their own house are less likely to marry and much less likely to have children.

    Tuition fees by their effect on demographics, will destroy the country’s future.

    • NickW
      Posted October 30, 2014 at 10:29 am | Permalink

      Note that student loans are not covered by the FSA, there is no proper written contract between borrower and lender, and there is nothing to prevent future governments from regarding loan repayments as a tax, which can be raised at will.

    • Mike Wilson
      Posted October 30, 2014 at 2:20 pm | Permalink

      Not a problem if graduates cannot afford to have children. We have more people coming into the country all the time. Don’t need to reproduce any more.

      • NickW
        Posted October 30, 2014 at 5:36 pm | Permalink

        Relying on immigrants and immigration for population replacement is a recipe for bringing the war between Sunni and Shia to the streets of Britain; I think we can all agree that that is undesirable.

        I wasn’t asked if I wanted the nature of my country to be destroyed, and I don’t agree with it. I want my children to be able to complete their education, and to afford a family house and the family that goes with it, and in that, I am sure I am not alone.

    • Colin
      Posted October 30, 2014 at 4:05 pm | Permalink

      You’re absolutely right, Nick. Most graduates will never pay a penny off the principal of their student loans.

      This system is crazy. The university has to be paid up front, so the government borrows the money (from the Chinese or whoever) to pay the university, then the graduate pays interest to the Chinese for 30 years, after which the taxpayer has to pay off the loan. Meanwhile the graduate can’t afford to buy a home or save for a pension because they’re giving all their spare money to the Chinese. So when they get old they’ll be reliant on the taxpayer for benefits to live on – a double hit for the taxpayer.

      It would make more sense for the taxpayer to pay the university in the first place, then instead of paying interest to the Chinese for 30 years, the graduate could be saving for a home and pension, and wouldn’t be a burden on the taxpayer in their old age.

      It would be better still if we had a system where parents actually saved to pay for their children’s education, of course…

      • Mondeo Man
        Posted October 30, 2014 at 10:07 pm | Permalink

        Better still reduce the number of people going to university to ’80s levels and then the state can pay for it.

        Anyone wanting to study for useless degrees pay for them themselves.

      • APL
        Posted October 31, 2014 at 8:15 am | Permalink

        Colin: “This system is crazy. The university has to be paid up front, so the government borrows the money (from the Chinese or whoever) to pay the university”

        And all it really does in inflate the salaries of the faculty. Making the course more expensive and causing student loans inflate too.

        All the while the quality of education goes down.

  21. Mark
    Posted October 30, 2014 at 11:33 am | Permalink

    I hope we haven’t reached average mortgages of £245,000 (£15bn/61,000). It’s bad enough with the real figure being £161,000, and re-mortgages nearing £160,000 according to Bankstat data. House prices remain dependent on foreign funding – whether that be the cash buyers using London as a safe/tax haven, or the mortgages that depend on borrowing overseas through the banking system that have provided essentially all the increase in mortgages outstanding from £417bn when Labour came to power in 1997 to today’s £1,292bn (commensurate with PSND ex, and largely responsible for PSND being £1 trillion or so higher to cover the banks).

    The other day we discussed the impact of the BoE liquidating its QE gilts: their working assumption is this would add 4% to interest rates. The impact on mortgage affordability at present levels of lending would be severe, pushing mortgage rates to 7-10%. We need policies that help to run down the stock of mortgages through encouraging early repayment and reduce the average sum lent to prepare for this inevitable storm.

    • Denis Cooper
      Posted October 30, 2014 at 3:23 pm | Permalink

      “The other day we discussed the impact of the BoE liquidating its QE gilts: their working assumption is this would add 4% to interest rates.”

      I assume that this is on the basis of a rapid liquidation over maybe months or just a couple of years? But say that it was spread evenly over two years; that would be an average of £182 billion of existing gilts a year released onto the market from the vaults of the Bank of England. Meanwhile, at the present rate the Treasury would still be issuing new gilts at a rate approaching £100 billion a year to fund the ongoing budget deficit. Thus liquidation of the Bank’s portfolio of existing gilts over two years would in effect roughly treble the annual rate at which gilts were being made newly available to the market – the existing gilts released from the Bank, plus the new gilts sold by the Treasury. I would guess that the resulting drop in gilts prices and rise in their yields would be much more severe than just a 4% rise in yields. There is also the twist that £375 billion is the current market valuation of the Bank’s stock of gilts, and as it flooded the market and prices plummeted its receipts would be much lower; it would make losses and then the Treasury’s indemnity would kick in, making it necessary for the Treasury to sell more new gilts to investors to borrow the money to compensate the Bank for its losses on the previously issued gilts it had bought and was now selling at lower prices … the answer is fairly obvious, that the Bank could not possibly sell off its portfolio of gilts over just two years, it might take more like twenty years for it to gradually unwind its holdings without severe disruption.

    • Terry
      Posted October 30, 2014 at 4:52 pm | Permalink

      It’s impossible for the BoE to liquidate its Gilts without having a huge effect on yields and the Bond market. Ditto the Fed and every other Central Bank who participated in this debacle. I would have thought an increase of 4% a conservative estimate, yet that figure would triple the month payments of many mortgagees and ultimately cause them to default. When Governments and CBs interfere with true capitalism and try to manipulate the markets, stand back and wait for the big bang.

  22. CHRISTOPHER HOUSTON
    Posted October 30, 2014 at 11:44 am | Permalink

    Home ownership promoted and prolonged the miner’s strike 1984-.

    In areas with concentrated coalmines, miners found they did not have transferable skills in the event of mine closure. Even an underground electrician had skills specific to making hermetically sealed connections because of explosive gases plus a myriad other considerations.

    House prices declined immediately and simultaneously because of the threat of closures. They could not sell to cover loans with their interest. Nor were there sufficient buyers. They and their families were therefore stuck. Backs against their house-walls. No choice but to strike. Grasping at a straw. They drowned, many losing their home, their wife, their children.

    Of course there are advantages to ownership. Usually it favours moving from an expensive home in a plush area to a bigger house in a poorer area. Selling a flat in some parts of London and buying a farmstead in the North is not pure exaggeration. But the other way round? You would need to be living in a farmstead and not a semi-detached. And, have transferable skills. And a wife and children who also at the same time wished to move away from family and friends.

    Certain property companies, in the rental field, knowing the divorce and separation rate, just love starry eyed young couples burdening themselves with a mortgage ( read LOAN with massive interest ). In love, they do not think that generally when their jobs become less well paid or disappear, the selling price also decreases.

    Debt is enslavement.

    Though one can slip the chains from time to time with luck, one still has to shackle oneself as a replacement for donkey years.

  23. APL
    Posted October 30, 2014 at 11:46 am | Permalink

    JR: “look forward to your old age knowing by then you will own your home and not face a rent bill.”

    Or to put it another way, You have the pleasure on knowing your hard work, sweat and tears can be confiscated and used to pay your care fees, in your dotage.

    It’s irrelevant that to own a house you have had to be pretty productive during your life and contributed taxes, National insurance <— Ha what a laugh!

    You are still going to be asset stripped by the state and bundled onto the local authority Liverpool pathway.

  24. David
    Posted October 30, 2014 at 11:58 am | Permalink

    “Homes are less affordable today when comparing prices with incomes than forty years ago. Part of this reflects social change. ”
    I would guess it was also because
    1) More houses were being built – planning permission was probably easy to achieve
    2) Rent control meant buying a house for BTL was less attractive
    3) People didn’t pay tax to give single mums a home – so reducing the attraction of BTL paid for by the tax payer
    4) Stamp duty was not a factor
    5) Taxes were lower – so more money to spend on houses (see part 3)
    6) Rates were higher encouraging old people to downsize.
    7) The British population did not increase by a million every 4 years.

    Of course all of these are easy to solve.

    • Mike Wilson
      Posted October 30, 2014 at 2:22 pm | Permalink

      When you say ‘taxes were lower’ – I’d say ‘they weren’t’. Seem to recall basic income tax at 33% when Maggie first went in to No. 10. She reduced it. And oversaw a house price boom and bust which led to hundreds of thousands of people losing their homes between 1988 and 1995.

      • Lifelogic
        Posted October 30, 2014 at 6:21 pm | Permalink

        Denis Healey had 83% plus 15% investment income surcharge to give 98%.

      • David
        Posted October 31, 2014 at 9:47 am | Permalink

        “When you say ‘taxes were lower’ – I’d say ‘they weren’t’. Seem to recall basic income tax at 33% when Maggie first went in to No. 10. ”
        But other taxes were lower e.g. VAT, stamp duty.
        (Also of course there were a lot more allowances e.g. MIRAS)
        The share of the economy that went in tax is higher now than in the 1970s.

    • Margaret Brandreth-J
      Posted October 31, 2014 at 4:46 am | Permalink

      Careful David… as a single mum , I have bought all my own houses and paid much to to keep married couples in social housing, worked for the NHS patients who all in my locality get handouts.

      • David
        Posted October 31, 2014 at 9:54 am | Permalink

        “Careful David… as a single mum , I have bought all my own houses ”
        Good for you. But I know lots of pro single mums who have been given houses by the tax payer which most tax payers under 45 couldn’t afford.
        Why should I give money to (a welfare recipient ed) to live in a house I couldn’t afford?
        If pro single parents didn’t get so much money then this country would have a different attitude to single parents. BTW I don’t have any problems with single parents, just the pros. Those who become single parents to get money or think that being a single parent entitles them to lots of money.

        • Margaret Brandreth-J
          Posted November 1, 2014 at 1:45 pm | Permalink

          It is working all the hours god sends David. You have to give up things like a social life , heating, cars , food , You have to meet the verbal abuse head on . Holidays don’t exist ..You have to meet the jealously of men who actually earn more than the women , the females being on a very low wage , but working 100 hours a week, and achieving more.

  25. Denis Cooper
    Posted October 30, 2014 at 2:47 pm | Permalink

    The last property boom in this country was partly funded by money from overseas, and it would be interesting to know to what extent that is starting up again.

  26. Terry
    Posted October 30, 2014 at 4:37 pm | Permalink

    Property prices have been deliberately pumped up by Government in an attempt to stimulate the economy. Ultra low interest rates and Buy promotions such as ‘Help to buy’ merely extend the day of inevitable calamity. They will crash. (Check out The Economist Global House Price Index) And in doing so, then complete the crash that commenced in 2007 but was halted by Government and BoE action. Their joint interference merely delayed the real day of reckoning at the same time exacerbating the main problem. Debt. Out of control debt was not checked but allowed to continue even to this day, increasing our Total National debt (Public and Private Sector) to dangerous levels. Despite their profligacy with our money they have not produced any of the desired real inflation which supposedly promotes growth. On the contrary because of their stifling of wages and setting ultra low deposit rates, their enemy, ‘Deflation’, is squeezing in. Collapsing Oil prices will further deflate the economy and there is nothing left in the armory to combat it. Bonds will fall and rates will rise.
    With deflation, no asset is safe so it will be a boon for the cash consumer but a nightmare for those in debt, including Governments. The storm clouds are already gathering for a re-run of 1929 but with much more to be lost this time, as the debt levels are much higher. It’s money-under-the-mattress time again.

  27. Kenneth R Moore
    Posted October 30, 2014 at 10:11 pm | Permalink

    “To have a healthy first time buyer market there also needs to be a sensible balance between new home construction and additional people seeking accommodation”. JR

    I agree with much of what Dr Redwood says here but I do believe he is again allowing the doctrine of political correctness to define the terms of his debate.

    We now have ‘additional people’ ..it used to be okay to say immigrants…then migrants was the acceptable term …what next?.
    There needs to be a ‘balance’ but firmly on the side of controls on ‘additional people’ – to try to build ourselves out of the housing shortage is futile.

  28. Kenneth R Moore
    Posted October 31, 2014 at 1:32 am | Permalink

    Tax evasion is not just illegal it’s immoral.People evading tax should be treated same as common thieves.This agreement helps us tackle them -Said great leader of the treasury George Osborne or was it Karl Marx…

    Dear Dr Redwood,

    We aren’t quite North Korea yet but we are one step closer today.
    I thought Conservatives were supposed to believe individuals can spend their own money more wisely than the state?. Tax payment and revenue was based on a bond of trust between individual and state based on a perception of fair rates and democratic control . Not threat of imprisonment.

    Mr Osborne with his tone seems to believe (as do all politically correct levellers ) that all money belongs to his government and that, with his authorisation we are allowed a small amount back.
    Isn’t it more ‘immoral’ for him to borrow billions the country cannot afford to pay back or destroy the value of savers pensions with his casual use of the printing press ?

  29. Chris S
    Posted October 31, 2014 at 1:51 am | Permalink

    To all those that have posted that my comments on “affordability” are rubbish :

    Of course there will be exceptions and there will be plenty of examples of First time buyers on good salaries buying a house or on their own. But, across the UK, this has not generally been the norm.

    It is true that House prices as a multiple of earnings ( 5.03 ) are currently higher than the long term average ( 4.11 ) but this figure is distorted by the situation in Greater London where the figure is 7.1. But this figure is not relevant to home buyers.

    It’s mortgage affordability that dictates how easy it is to buy and own a home and that’s based on earnings v mortgage interest rates and available mortgage deals.

    Here are the facts on mortgage affordability for the whole of the UK since the 1980s.
    _________________________________________________________

    The years in which affordability was most difficult were 1990-1991 at 63%-65.5%

    The year in which affordability was easiest was 1996 at 23.6%

    The long term average is 35.8%

    The current figure for the whole of the UK (Q3 2014 ) is only 29.5%

    Affordability has been below the long term average since interests went down to record lows in 2008.

    The current market prediction for interest rates is that they will rise slowly to reach around 2.6-2.75% in late 2018. This is well below the historical average so will mean that affordability will be unlikely to reach a significant peak.
    ________________________________________________________

    These stats are taken from the Halifax Mortgage Affordability Index which is expressed as mortgage costs as a percentage of household income. There is a complicated definition but basically the figures for income are based on average earnings for all full time employees in the UK. For mortgages, the figures are based on new mortgage advances including home movers and first time buyers.

    Note : if existing mortgage holders were included affordability would be a little easier.

    • zorrro
      Posted October 31, 2014 at 7:05 pm | Permalink

      You forgot to add that in 1990-91 interest rates on mortgages were ridiculously high at 15+%……. They were difficult to afford but still manageable. It doesn’t matter what the interest rates are now because wage earners have no chance of affording mortgage without massive intervention.

      zorro

      • zorrro
        Posted October 31, 2014 at 7:07 pm | Permalink

        What would 15% interest rates do to your affordability statistics now?

        zorro

    • Mike Wilson
      Posted October 31, 2014 at 11:58 pm | Permalink

      “It is true that House prices as a multiple of earnings ( 5.03 ) are currently higher than the long term average …”

      That figure is utterly meaningless. Distorted by current low interest rates and the fact that home movers will have lower mortgages than first time buyers and higher earnings as they will be older. The simple fact remains that home ownership has never been more unaffordable for youngsters hoping to buy their own home.

      I repeat – 3 bed terrace in Wokingham – £325k. Average wage 25k.

    • Mike Wilson
      Posted November 1, 2014 at 10:55 am | Permalink

      Sorry, you are so wrong about this I can’t leave it alone. This is in today’s Telegraph:

      ” … It also poured cold water on any claims by today’s older generation that buying a house was as difficult when they were young. The ratio between property prices and wages has shifted so enormously that house buying today is as difficult for buyers with two wages as it was 35 years ago for a single borrower on just their own income. Today’s first-time buyer – putting down an average £30,000 – would need to borrow 3.4 times a single wage, compared with a borrower 35 years ago needing 1.4 times his wage, to purchase the equivalent property. …”

      http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11109153/The-average-working-life-isnt-long-enough-to-pay-for-a-house.html

      Even those figures have no meaning in the Southern half of the country. 3.4 times an average wage + 30k would not buy you anything – not a single property – in much of the country.

  30. Steve Cox
    Posted October 31, 2014 at 5:22 am | Permalink

    Oh dear, and now Mr Cameron has gone and put his foot in his mouth once again and said that he hopes interest rates will stay at rock bottom for ever. Not a very wise thing to say, Dave, when your party is so dependent on the votes of savers and pensioners who were hoping to be able to afford a holiday or a few luxuries bought with the interest on their savings.

    • Mike Wilson
      Posted November 1, 2014 at 10:56 am | Permalink

      Someone needs to disabuse people of the idea that putting their money in a bank entitles them to above inflation interest – risk free.

  31. sm
    Posted November 2, 2014 at 12:20 am | Permalink

    Slowly reduce & remove tax relief on BTL properties.
    Some tax relief for purchasers of newly built properties.
    Restrict non uk citizens ownership of property except in specified developments.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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