Last week in The Guardian Patrick Collinson wrote an interesting article on how this country is going to avoid a house price explosion of the type that many believe lead to our current financial situation.
His article was quite critical of the Labour Government in that he says two years ago they thought it was a great idea ‘for households to buy over-priced houses by borrowing loans equal to five or even six times’ joint income.’ He also questions the intelligence of 100% buy to let mortgages and buy to let lending financed through global wholesale markets.
He maintains that Britain and America’s attitude to lending was responsible for this financial crisis we find ourselves in, I would suggest that they were not on their own, in fact virtually every well off country on the planet did the same thing, but I guess he is largely right. So what does he suggest is the way to proof ourselves against this sort of disaster in the future?
Basically, don’t trust the banks to run the country’s finances. He states that after 12 years labour have finally worked that out. Lord Turner has made a number of suggestions for government regulation of the finance industry and most of them do seem sensible.
Collinson points out that these are not new ideas and that countries such as Germany and Hong Kong have had these policies for years. He also sounds this warning
“Banks need to start lending to businesses again if we are to kickstart the economy back into life. But in the mortgage market, we should be thinking about when and how we turn the tap off rather than on.”
It is an interesting opinion. I wonder who agrees with him. Knowing experts there are bound to be plenty who don’t.
