View more on these topics

Lib Dems miss the point

They were almost there and we can see where they are going, but the Liberal Democrats were just a little too wide of the mark.

The party is asking lenders to offer a five-year fixed, no fees, no frills standard mortgage option where lenders compete to offer the cheapest rate.

As we report on page 4, dubbed SafeStart, the vanilla product would be offered to borrowers at 85% LTV, funding would be provided in the form of guarantees from insurers or from the government, and lenders would compete to offer the cheapest product to fit the criteria. In the grand scheme of things it sounds good, and as the Lib Dems say, this is “more Aldi than Waitrose”. And with lenders competing on pricing, there could even be room for brokers in this market too.

The Lib Dems have gone out on a limb and it’s the first political party to try to redraw the lending landscape. But at 85% LTV not only have they forgotten the first-time buyer sector – which needs to be revived to kick-start the housing market and the economy – but also what makes the lending industry tick.

Innovation is the key word here and to be truly competitive and to offer choice to consumers, lenders cannot be constrained by such tight criteria. As we suggested five months ago, a vanilla government-backed mortgage offering a standard 5% five-year fixed rate for borrowers with 5% deposits, renewable five times and available up to 5 x income makes much more sense as a starting point.

Government-backed lenders could still compete on price and the resulting flow of money would enable them to develop other product offerings too. This is one idea that other political parties should not turn yellow about.

Recommended

A Day On The Rock

Yesterday was one of those mad PR days which were very enjoyable but lots of rushing about and talking till my throat dried up. The subject? Good old Northern Rock.

RPI drops to lowest rate since 1960

Depreciation in house prices and lower mortgage payments led to the Retail Prices Index falling to 0.1% in January, the lowest rate since 1960.

CML reports 40,000 repossessions in 2008

Figures from the Council of Mortgage Lenders released today show 40,000 people lost their home last year, representing 1 in 290 mortgages and up from 26,200 in 2007.

Patient - thumbnail

Company sick pay – new findings

Research by insurer LV= suggests that some 11 million employees in the UK have no company-paid sick leave entitlement. So if an employee from within the above grouping cannot work through illness or injury for any period of time, their only income would likely be that provided by state benefits alone.

Newsletter

News and expert analysis straight to your inbox

Sign up