Yesterday I was at a seminar about people getting rich by buying multiple investment properties, totally on borrowed funds (I was only there because it was misrepresented and I couldn’t get out!). By contrast, today I heard a fascinating discussion on BBC Radio 5 Live about people who’re having problem buying one property, because they can’t get funding. And I became a big fan of their resident expert Martin Lewis (I also mentioned him in yesterday’s post), who is a regular contributor to the programme.

Here’s a paraphrase of just one conversation:

Text message from a listener: “I find it incredibly frustrating: I can’t get a mortgage because I can’t get a deposit together. So I have to rent privately, where I pay £650 / month, so I could clearly afford the mortgage, because I earn £32,000. The situation is ridiculous.”

Martin Lewis: “No, it’s not unreasonable that lenders ask for deposits. House prices fluctuate, so they don’t want to risk the whole of the purchase price.

“The expectation of entitlement to own your own property is part of the reason we got into the financial crisis. People were overstretching themselves in the rush to be on the ladder. I’ve talked to 20-year-olds who felt it was “so unfair” they couldn’t buy a property. I bought my first property at 33, which is old by today’s standards, but by then I was financially stable and wasn’t pushing to buy. Too many people nowadays think about the mortgage first and their financial situation second. What’s wrong with saving up for a deposit, so that your financial situation is stable before you buy?

“Renting is not a dirty word. People in this country think renting is throwing money away, but often if they can’t afford a repayment mortgage they get an interest-only mortgage. And they don’t consider that to be throwing money away!” 

I’ve also heard UK Business Secretary Vince Cable say that the culturally implied pressure to own our homes contributed to house prices becoming unsustainably high and thus contributed to the crash.

I have thought for a long time that our obsession with home-ownership at any cost has negative consequences; but now that a high-profile broadcast journalist / TV presenter and a Cabinet minister are saying similar things (and saying them better), maybe that will change attitudes.

I do realise however that this could be a minority view, so comments are welcomed.

WANT TO KNOW MORE?

Here’s a link to the programme’s webpage on the BBC iPlayer: http://www.bbc.co.uk/programmes/b01qlknk. The mortgage discussion began, with an item about current deals (low rates but high deposits needed and very high fees), at about 41 minutes in. The above response from Martin Lewis comes at 50 mins in.