Study for an exam before your first mortgage
An interesting news snippet has emerged this week on my continuing theme of fiscal responsibility. Malcolm Hurlston, the head of the Consumer Credit Counselling Service debt charity, has called for mortgages to be granted on the basis of study followed by an exam, in a similar manner to driving licenses.
As with so many new ideas these days, this one has crossed the Atlantic after a few years being tried in
America, where it is known as ‘pre-buying education’.
Mr Hurlston believes that one of the main lessons of the credit crunch has not been learnt, that young, first-time buyers on low incomes buy houses before they are fully able to afford them.
Statistics do show that these are the people most likely to get to find themselves trapped in a cycle of unmanageable debt.
The idea proposed is that the Financial Services Authority (FSA) should supervise mortgages for first time buyers and ensure that they receive the appropriate advice on defaults, repossession and other credit issues.
I’m sure everyone reading this will be shocked to their very core that the mortgage industry has given a lukewarm reaction to these proposals.
The Council of Mortgage Lenders (CML) has said they will ‘consider the proposals as an interesting perspective’. In other words, bugger off and let us keep making huge piles of money from the financially incompetent.
The CML made a further point that many people who default on their mortgage do so because of a change of circumstances, primarily losing their job. Their argument seems to be here that the proposed plans will not help people in these situations.
However, this is clearly untrue. The new plans are designed to ensure that first time buyers learn to factor into their plans unforeseen changes in their future circumstances, to expect the unexpected.
The ideas put forward by Mr Hurlston are certainly interesting and deserve consideration by the next government. His plans are perhaps more invasive than many mortgage customers would like, but with a small amount of tweaking they would pass tests of both efficacy and efficiency.
