"Never, in the field of human conflict...

...was so much owed by so many, to so few"

THREADNEEDLE STREET in the City.
Bank of England (on left).

SO said Winston Churchill. speaking in the House of Commons on August 20, 1940. As we know, Margaret Thatcher liked to think that she was following in Churchill's footsteps, and Tony Blair, though he owed his place to the British public's final revulsion with Thatcherism, has been happy enough to follow in the path of Mrs.T.

Now Britain's two over-long lasting prime ministers can at least repeat with pride that famous phrase of Churchill's. Except he was talking of course about the heroism and sacrifice of RAF fighter pilots in the Battle of Britain, whereas today the same sentence applies to the property and financial sector, and a different kind of audacity, maybe.

Mortgage debt tops £1 trillion for first time
Ashley Seager
Friday June 30, 2006 Guardian

Mortgage debt in Britain has passed £1 trillion for the first time, the Bank of England revealed yesterday as it reported the strongest rise in new mortgage lending for two-and-a-half years.

The Bank said its seasonally adjusted figures showed total mortgage debt rose to £1.006 trillion last month, up £9.3bn from April. Analysts said it showed the housing market appeared to be in rude health in spite of higher
unemployment and squeezed income growth.

The overall amount of outstanding debt in Britain, including credit card debt and bank loans, rose to just under £1.2 trillion, roughly equal to the entire yearly output of the British economy.

The number of new mortgage approvals rebounded to 117,000 last month from 106,000 in April, suggesting the housing market may be entering another
strong period after slowing slightly in the spring.
"Certainly, there are no signs of a slowdown coming through in the housing market and it looks as though
activity will remain strong over the summer," said David Page, an economist at Investec. Most experts think the level of secured mortgage debt is not necessarily a problem for the economy since the value of the houses and flats on
which it is secured has risen faster.

But George Osborne, the shadow chancellor, said the country was now "mortgaged up to the hilt".

"That's bad news for vulnerable families at risk from the impact of higher interest rates. And it is a risk to the stability of the whole economy," he said.

House prices have boomed for nearly a decade, driven by low interest rates, falling unemployment and rapid income growth. By most measures, however, they are overvalued but have defied predictions of a crash.

Figures from the Nationwide yesterday, though, suggested prices may not be rising as fast as earlier this year. The building society reported a smaller-than-expected rise of 0.3% in the price of an average property this
month, taking it to £165,730. The annual pace of growth picked up to 5% - but only because prices fell in June last year.

Fionnuala Earley, the Nationwide's chief economist, said prices had risen just 1% in the second quarter of the year, half the pace of the first three months.
"While demand seems fairly stable, the deterioration in
affordability and its likely impact cannot be ignored. Mortgage payments for someone on average earnings now take up around 42% of take-home pay compared
with around 32% three years ago.

"While earnings growth remains lower than house price growth, the 'ability to pay' constraint will continue to bite. So, too, will lending constraints in terms of income multiples and loan-to-value limits, especially
for young first-time buyers."

It was Tory policies of stopping public housing and encouraging people to buy council houses that helped drive many people into debt, in the name of the "property-owning democracy", a phrase first heard from Harold Macmillan in the 1950s but since adopted by Blairites as their own. Came the "negative equity" crisis of the late 1980s and early 1990s, when home owners struggled to repay mortgages for more than their homes would fetch if they could sell them, and estate agents books were filled with homes that had been repossessed.

Even at the "yuppie" end of the market, where well-paid City workers believing the boom would last had played Monopoly with borrowed money and real properties, as well as buying themselves over-expensive homes and goods, recession brought the shock realisation that "as safe as houses" might mean safe as a house of cards. Oddly enough some of the last people to realise how precarious capitalist prosperity was were some of our so-called "thinkers" on the Left.

It helps to keep house prices up in London that while thousands are homeless, property owners keep thousands of potential homes empty. Hence many more young people stay with their parents or move in with relatives and friends. For those young people who manage to get on the "housing ladder" a mortgage may very likely have to be repaid on top of a student loan, while at the same time they are being told to save for their pension age!

It has also been reported that the amount of money UK households have left to spend after paying the bills has fallen by 10% over the past four years as increasing fuel prices and mortgage rates have started to take their toll.

The typical family with two children aged under 16 has seen their level of disposable income fall by an average of £82 a month since 2002/03, according to accountants Ernst & Young. It said the fixed monthly costs associated with running a household had outstripped wage inflation, rising by more than 30% since the 2002/03 tax year, to account for 71% of take-home pay, compared with 64% four years ago.

(Rising bills erode disposable income, Guardian, June 30).

Politicians always blame inflation on over-generous pay rises, excepting of course their own. Anything else is beyond criticism, as it is outwith their control. That applies to the current wave of factory closures and even hospital sackings, I suppose, and will extend to the next crisis when the property bubble bursts and millions cannot afford to pay their debts. It's the system, innit.