In an attempt to prevent another burst housing “bubble”, the chancellor, George Osborne, has announced he will allow the Bank of England to vary the types of mortgages people can have. At the moment, the big lenders are still very wary, and many people are in the unfortunate position of being unable to save up a large enough deposit in order to buy a property, which is affecting everyone—not just those struggling to get on the first rung of the housing ladder.
As most of us probably remember, the situation was all too different a few scant years ago. Banks and building societies were literally throwing money at people and it was not unheard of to be offered mortgages of more than 100% of the property value. But since the property bubble burst and many major banks went to the wall, the housing market has contracted and most lenders now require larger deposits before they will give you a mortgage.
A Financial Policy Committee, whose powers will come into effect at the beginning of next year, will administer the Chancellor’s plan. The committee’s job will be to moderate the economy. Lenders will have the power to make their mortgage products more attractive by lowering the amount of deposits to as little as 5% if/when the market begins to slow down, which will attract first time buyers and property investors, but if the market threatens to heat up too much, lenders can increase the amount of deposit required in order to cool it down.
