Monday, February 23, 2009

Another mistake

A thoughtful post about 100% mortgages from Andrew Lilico.
It's a resonant soundbite for Brown to say he is going to ban them, but the problem is, what happens to all the people who will fall into negative equity over the next year or so? If they can't have 100% + mortages they can't move. As Lilico says it's a recipe for disaster. Still, Brown's complete ignorance of markets, economics and everything else pretty much backs up his inability to deal with any matter, without the law of unintended consequences kicking in.
However, the critical bit is not the loan to value but the income being used to service the debt and interest. The sensible thing to ban would actually be interest only mortgages - yes another downward lurch in prices, but it would return us to sound money ( whatever that is) very quickly.

2 comments:

Winchester whisperer said...

I thought GB was taking out a 100% mortgage on the country?

kinglear said...

ww - only 100%? My bet is about 300%