Are falling house prices actually a bad thing?
Britons' obsession with home ownership is somewhat unique, and it is fair to say that many of our friends on the Continent are left perplexed by the importance we attribute to making the step up onto the housing ladder. While there is much stigma attached to a life of renting on these shores, it is commonplace in counties such as France and Germany.
Equally, our perspective on house prices, some would say, is rather warped. Rising house prices are widely celebrated, and regarded as a reflection of economic strength - while the converse gives us jitters, and can lead to knee-jerk economic policy.
News that asking prices fell 0.1 per cent last month (according to Rightmove) fits the trend of stagnation in 2018, and estate agents are suddenly finding their shelves full, with fewer buyers coming to the table. And many people are concerned as a result, convinced that it is a portent of economic pain to come.
It hasn't always been this way
Interestingly, our infatuation with increasing house prices is a relatively novel one. In the post-war era, where housebuilding occurred at a rapid pace - coupled with the fact that controls on lending were strict - house price growth was generally subdued, and few people thought much about it.
However, since the 1970s, the combination of financial deregulation, lower build rates and favourable tax rules for homeowners have all contributed to an explosion in the cost of property. In fact, the average house price has rocketed from just over £50,000 two decades ago to around £220,000 today. To give that some context, this means the house-price-to-earnings ratio in 1995 (based on the average UK salary) was roughly 3:1, whereas today it sits at around 7:1.
One intriguing suggestion to emerge last week came from the think tank IPPR, who posited that the Bank of England should freeze house prices for the next five years by limiting mortgage lending. This is Money editor Simon Lambert took this a step further, pointing out that house prices would need to drop by 30 per cent in order to reach 'fair value'.
At a time when interest rates and unemployment levels remain at historic lows, such a possibility is less than remote in the absence of radical (and implausible) intervention. And of course, a rapid decline would have terrible consequences for many people, whose home is by far their most valuable asset. But it is conceivable that, despite an acute housing shortage, we may yet see a natural, sustained period of sluggishness in prices, as the economy deals with various uncertainties. Could anyone legitimately claim that this would be unequivocally negative?
Perpetually increasing house prices have been a blocker on social mobility, carved out an inter-generational divide, and reduced owner occupation by more than 6 per cent in the last 15 years alone. Added to that, they are actually a major economic inefficiency. All the extra money spent on housing could be reinvested elsewhere, or used to provide spending stimulus to an array of other industries.
A significant period of flat house prices would allow wages to narrow a gap which has mushroomed in recent times, but also provide the powers that be with a window of opportunity to recalibrate regulations so as encourage housebuilding, improve the correlation between building rates and downward price pressures, and ultimately create the basis for a more sustainable market.
Slow is smooth
Intervention isn't always the answer to market failure. In the same way that schemes such as Help to Buy have pumped up house prices, many would rightly be loath to see drastic policy implemented which causes a shock. However, the present cooling off of house prices may be a sign that the market is naturally righting itself.
The important thing is that we as the wider public - even homeowners among us - do not perceive this as cause for panic, and, certainly, it should not be a prompt for policymakers to fight against a correction by artificial means. The lessons of the not-too-distant past illustrate that an economic model dependent on regular bursts of rocketing house prices is one built on sand, and the consequences down the road will only be more severe.
Without doubt, falling house prices would have terrible ramifications for many people in terms of negative equity, and perhaps even repossessions in some cases. Championing a slump is therefore only a stone's throw away from schadenfreude. But a period of a few years, where homes become more affordable as their cost flatlines, and wages grow? It would be tough to argue that this would do more harm than good, given the current imbalances of the market.
There is barely a week to go until the conclusion of the 2017/18 financial year, which means that, as ISA season begins to hot up, time is running out to take advantage of your ISA allowance.
At the Summer Budget in 2015, George Osborne had multiple nuggets of good news for investors in peer-to-peer lending (P2P), most notably the announcement of the new Innovative Finance ISA (IFISA).
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.