Great British dream goes to the dogs

When the liquidity crisis began to bite, Lending Strategy ran a cartoon showing a graph with interest rates going up alongside a steep rise in repossessions. The graph was being interpreted by a politician at a briefing and his message was simple.

He said: “The bad news is that repossessions are going up but the good news is that it’ll be the lenders that will get the blame.”

To the list of culprits we should have added brokers. After all, they’ve helped borrowers source innovative and competitive mortgages in a lively and confident market. Some even found products that helped customers buy homes after divorces or put together credit repair packages to help clients during the hard times.

True, their motives were not always altruistic, just as their punters were not always honest when completing their applications, but buying something as import- ant as one’s own home can cloud judgement. Where do you draw the line between fraud and wishful thinking?

Besides, supporting consumers at the margins also helped the government to achieve its wish to increase home ownership, and low interest rates allowed the UK to spend its way out of recession.

Think back to last summer – we had a new Prime Minister who for a decade as chancellor had defied the twin terrors of inflation and recession. Not only did Gordon Brown claim responsibility for the lowest interest rates seen for decades but also unveiled plans to build three million new homes by 2020.

Back then we were helping to fulfil the great British dream of extending the property-owning democracy but now the boot’s on the other foot. We weren’t pricing for risk or lending responsibly and, according to the Financial Services Authority, we weren’t treating customers fairly.

We should have realised that the tripartite authority was bereft of ideas and leadership but if we’d priced for that risk the UK would have gone to the dogs years ago. Even so, the authorities seem hell-bent on reinforcing the stable door six months after the horse has bolted and the squeeze seems to be getting tighter than ever.

As a result, doorstep lenders charging usurious rates are enjoying a boom, first-time buyers are as rare as bobbies on the beat and house builders are seeing tough times. For example, Taylor Wimpey, our biggest contractor, has seen orders fall 19% and reports a £19.5m loss.

That’s hardly likely to encourage the private sector to produce further housing starts, which in England had fallen from 160,118 in 2006 to 151,361 last year anyway. Social housing follows a similar pattern – starts by housing associations fell from 17,458 to 15,299 over the same period. Three million new homes by 2020? I wouldn’t bet on it.