East Lancs homeowners’ mortgage debt millstone

East Lancs homeowners’ mortgage debt millstone

East Lancs homeowners’ mortgage debt millstone

First published in News Lancashire Telegraph: Photograph of the Author by , Local government reporter

EAST Lancashire homeowners have a massive ‘mortgage millstone’ round their necks, new figures reveal.

Owner-occupiers in Burnley have the highest proportion of mortgage debt as a percentage of the value their properties in the UK, at 80 per cent.

Close behind come mortgage holders in Hyndburn with 76 per cent and in Blackburn with Darwen at 72 per cent. The national average mortgage debt is 54 per cent of the home’s value.

Even in affluent Ribble Valley the proportion is 57 per cent, in Chorley it is 67 per cent, Rossendale 67 per cent, and Pendle 68 per cent.

Local estate agents and national experts see little sign of the problem easing, with a low-value property market in East Lancashire, cash-rich landlords buying up cheap homes, and a shortage of cheap or low- deposit mortgages.

They hope that efforts by local authorities to kick-start a rise in house values succeed in producing a ‘slow, sustainable’ long-term increase.

Lucian Cook, head of residential research at Savill’s estate agents, who produced the nationwide statist- ical analysis, said: “These high levels of mortgage debt are a millstone around the neck of East Lancashire homeowners caused by people buying houses cheaply with high levels of borrowing before the last price crash.

“It is unlikely to ease and they are at risk of repossession if interest rates go up.

“It’s made worse by landlords buying cheap housing in cash so people cannot downsize and some properties staying empty.”

Oxford professor Danny Dorling said: “This is caused by East Lancashire people on low incomes buying properties with 100 per cent or more mortgages.

“People think it is like a lottery ticket to make money on their rising house values but if the ticket loses, they end up with a mortgage millstone round their neck.”

Blackburn MP Jack Straw said: “These are worrying high levels of mortgage debt. It means people are stuck with houses they cannot sell and which are not going up in value.”

Charles Baker, of Burnley’s Falcon and Foxglove estate agents, said: “People were taking out 100 or 120 per cent mortgages and then the housing market crashed.

“We need to see the slow, sustained increase in house prices local councils are trying to kick-start.”

Comments (3)

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7:04pm Wed 22 Jan 14

Begbie says...

It was greed what done it! Blairs crazy housing boom and greedy estate agents. Bought mine for 30k, 6 years later it was valued between 95-110k. Lunacy.
We now have a generation who can't afford to leave their parents homes.
It was greed what done it! Blairs crazy housing boom and greedy estate agents. Bought mine for 30k, 6 years later it was valued between 95-110k. Lunacy. We now have a generation who can't afford to leave their parents homes. Begbie
  • Score: 24

8:42pm Wed 22 Jan 14

Kevin, Colne says...

This piece by Bill Jacobs has left me bamboozled; which I grant you isn’t very hard to do.

To be quite frank these aggregated figures are pretty meaningless. I would hazard a guess that mortgage millstones are weighing upon those people that bought at or close to the top of the market with a 100% interest-only mortgage.

Leverage in the from of Loan to Value and margin of safety are a constant. Leverage should be treated with caution: it magnifies gains and losses.

Providing that a mortgagor with a high LTV can make the scheduled repayments and does not wish or need to move there is unlikely to be a catastrophe.

I am not sure that the problem was greed, although that may have been a motivating factor in some instances.

My honest opinion is that I think the nation fell into a property mania – a period of collective insanity – promoted by the property thought collective – PTC. This consisted of house-builders, lenders, estate agents, politicians and the national press and broadcasters.

As the late John Kenneth Galbraith observed: ‘If there must be madness something may be said for having it on a grand scale’.

Among the PTC few of them show any sign of acknowledging their role in the mania, let alone apologizing, with one notable exception.

Robert Peston at the BBC admitted: ‘More broadly the media was too infected with the popular enthusiasm for borrowing as much as you could to buy a home. Property sections in newspapers and series on television … helped reinforce the idea that only the insane would fail to mortgage themselves to the hilt to buy a property.’ They were, according to Peston ‘cheerleading for all those businesses that profited from the house-buying frenzy. And the personal finance pages gave us comfort that bingeing on debt and property was almost a public duty’. He admits that the media failed to play a skeptical watchdog role; and he’s right. See Peston R. How Do We Fix This Mess? p.160-61.

In short recklessness was falsely robed as financial sophistication.

I am afraid that many sections of the mainstream national media have reverted to type and are continuing to peddle absolute nonsense as serious journalism.
This piece by Bill Jacobs has left me bamboozled; which I grant you isn’t very hard to do. To be quite frank these aggregated figures are pretty meaningless. I would hazard a guess that mortgage millstones are weighing upon those people that bought at or close to the top of the market with a 100% interest-only mortgage. Leverage in the from of Loan to Value and margin of safety are a constant. Leverage should be treated with caution: it magnifies gains and losses. Providing that a mortgagor with a high LTV can make the scheduled repayments and does not wish or need to move there is unlikely to be a catastrophe. I am not sure that the problem was greed, although that may have been a motivating factor in some instances. My honest opinion is that I think the nation fell into a property mania – a period of collective insanity – promoted by the property thought collective – PTC. This consisted of house-builders, lenders, estate agents, politicians and the national press and broadcasters. As the late John Kenneth Galbraith observed: ‘If there must be madness something may be said for having it on a grand scale’. Among the PTC few of them show any sign of acknowledging their role in the mania, let alone apologizing, with one notable exception. Robert Peston at the BBC admitted: ‘More broadly the media was too infected with the popular enthusiasm for borrowing as much as you could to buy a home. Property sections in newspapers and series on television … helped reinforce the idea that only the insane would fail to mortgage themselves to the hilt to buy a property.’ They were, according to Peston ‘cheerleading for all those businesses that profited from the house-buying frenzy. And the personal finance pages gave us comfort that bingeing on debt and property was almost a public duty’. He admits that the media failed to play a skeptical watchdog role; and he’s right. See Peston R. How Do We Fix This Mess? p.160-61. In short recklessness was falsely robed as financial sophistication. I am afraid that many sections of the mainstream national media have reverted to type and are continuing to peddle absolute nonsense as serious journalism. Kevin, Colne
  • Score: 9

5:31am Thu 23 Jan 14

Timefor says...

The sooner housing is viewed as somewhere to live rather than as an investment then the sooner the millstones will not be put around other peoples' necks.

Another example of ordinary people being conned by the rich. It doesn't happen in fairer countries.
The sooner housing is viewed as somewhere to live rather than as an investment then the sooner the millstones will not be put around other peoples' necks. Another example of ordinary people being conned by the rich. It doesn't happen in fairer countries. Timefor
  • Score: 6

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