Rising house prices are not the answer to the debt question
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I was interested to read the article by Robert Winfield, managing director of Chartwell Funding, in the June 28 issue of Mortgage Strategy - in particular his comment about supporting a boost in activity in the housing market and his suggestion that with the revenue raised the government could reduce the national debt.
This gave me a pleasant chuckle. Face it, rising house prices are bad for two reasons.
First, recent research by the Organisation for Economic Co-operation and Development shows there is a strong relationship between rising property prices and declining exports.
The trouble is that on a national level we need to export more and import considerably less to reduce the monumental debt hanging around our necks.
Second, we should not allow consumers to get themselves into ever more debt as a result of rising house prices in the absence of rising wages. This is certainly not useful when it comes to paying down debt.
As for high house prices, the penny has already dropped in Downing Street - lower housing costs means that more Income Tax can be charged without affecting disposable income.
The government has started elegantly with housing benefit and surely caps on both LTV and salary multiples are just a formality, given Bank of England governor Mervyn King’s views on property.
Maybe we will go so far as to cross-check stated income against tax returns.
That would help pay down debt both by ensuring people only take on debt they can afford and by catching out tax dodgers understating their income.
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