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24 | Negative outlook
A year of unintended
consequences
Peter Beaumont, chief executive,
Residential Property Solutions, does not
think we’re out of the woods just yet
A
s 2009 draws to a close there is a Economy  The lowest interest rates on record have
definite sense of optimism in the air Let me start with the economy. The stock helped thousands if not millions of
that the worst of the recession is market has rallied strongly in recent months homeowners remain in control of their
now behind us, with economists and, on the basis that share prices have mortgages, despite falling incomes and rising
predicting a slow but sustained historically risen ahead of economic recovery, unemployment. And for those unfortunates
recovery in 2010. many commentators are taking this as a sign who have struggled to keep their heads above
The housing and mortgage markets are that the good times are but a few months away. water financially, lender forbearance and
showing the first tentative signs of growth, However, higher share prices have been government rescue schemes have helped
with house purchase activity picking up and underpinned by quantitative easing; the prevent them from becoming repossession
even buy-to-let lending increasing for the first government pumping billions of pounds into statistics.
time in two years. And, as if further proof was the economy. There are few signs that share But lender forbearance can only last so
needed that the good times are just around prices have risen because of a genuine long and government rescue schemes can
the corner, the Council of Mortgage Lenders economic growth. Quite the opposite: this is only support so many. By not taking action
has cut its forecast for the number of the only share price rally on record which has today, lenders may have simply been
properties to be repossessed this year, from an occurred during a period of diminishing share storing up problems for tomorrow. The
initial figure of 75,000 to a far more palatable trading volumes. We shouldn’t, therefore, take problem of repossession has not been
48,000. higher share prices as a sign of good times to resolved; it has simply been delayed until
In the introduction to its 2010 forecast, the come. They are simply a sign of government another day.
CML said: “There have been some more funded good times in the past. My concern, therefore, is that many of the
positive signs in recent months, both from the If we look at other sectors of the economy, early signs of recovery are not based on
economy at large and the housing and the effects of government support are also easy genuine economic growth, but on state
mortgage markets. The unprecedented raft of to see. The car scappage scheme has been sponsored lifelines. In due course quantitative
support measures, taken by authorities in the heralded as a great success in keeping the easing will end as will the car scappage scheme;
UK and globally, have underpinned the motor industry afloat, with new car sales up VAT will be restored to 17.5 per cent; interest
financial systems and we are now likely to be 11.4 per cent in September compared to the rates can only go one way and lenders will not
moving out of recession, at least in a technical same period last year. Although the scheme has be able to sit on their hands for ever and take
sense. There is a general sense that the worst recently been extended, it will have to end no action against defaulting borrowers. Then
has now been avoided and we are now more eventually and then what happens? we’ll start to see just how robust the underlying
positive on the outlook than a year ago.” Likewise with the 2.5 per cent cut in VAT. Not economy really is.
So, we can all sit back, let out a sigh of relief, only has this helped new car sales, but it is also My fear is that the supposed economic
enjoy Christmas and look forward to a far credited with maintaining spending in the high recovery will start to wobble and fail – a
more prosperous 2010. street. The Centre for Economics and Business process which could be exacerbated by
Research believes the move has boosted retail unexpected world events, such as emerging
Or can we? sales by approximately £9 billion over the course financial problems in Dubai. What we need are
I don’t want to be the Victor Meldrew of the of 2009, at a cost of between £4 billion and £5 genuine initiatives which get to the root cause
housing market, but I’m afraid I’m not billion to the UK taxpayer. But on January 1st of the problems, rather than endless
quite as optimistic as some commentators this subsidy comes to an end. The big question government handouts which will cost us all, as
appear to be. Why, because I have concerns is, will the good times follow suit? taxpayers, very dearly in the end.
that the indicators which are being used as I’m sorry to be the grumpy old man of the
evidence of recovery, may be giving us a false Housing market housing market, but I don’t think we’re out of
reading. Which brings me on to the housing market. the woods just yet.
January 2010  Mortgage Introducer www.mortgageintroducer.com
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