Mortgage exam 'needed for first-time house buyers'

Mortgages should only be given to some first-time buyers "after study and an exam", according to the chairman of a debt charity.  Home loans should be sold with a health warning, not tax breaks, said Malcolm Hurlston of the Consumer Credit Counselling Service. Those who had bought a home too soon were most likely to get into debt, he added.

In a speech to members of the credit industry, Mr Hurlston said that the credit crunch had changed the financial system.  But he added that some lessons had not been learned for first-time buyers - many of whom found that home ownership was a "trap".

"The people most likely to get into debt in Britain are those on low incomes who have wrongly or too soon embarked on home ownership," he said.

"Think Northern Rock. Was it not apparent to everybody here that 110/120% mortgages, some partially disguised as unsecured, were dangerous madness?"

He added that some form of tuition should be considered for those on low-incomes getting a mortgage for the first time.

"First time mortgages should be sold not with pretty ribbons and tax breaks but with health warnings," he said.

"They should be sold like driving licences, after study and an exam."

He called for the City watchdog, the Financial Services Authority, to supervise all first mortgages, and for home ownership certificates for anyone buying a first house.  He pointed to a federal mortgage programme in the US for those on low incomes.  Those who apply for the loan can also get free or low-cost advice on buying a home, renting, default, repossession and credit issues.

In 2007, about 1.7 million individuals and families in the US received housing education and counselling, with the numbers growing since the early 1990s, the CCCS said.

Sue Anderson, of the Council of Mortgage Lenders, said that lenders would consider the comments as an interesting perspective.  She said there was a case for strengthening general guidance on credit, so that potential buyers could equip themselves with the appropriate information.

But she said this raised questions on whether this was what consumers wanted, and whether it would make a difference in the numbers getting behind on their mortgage payments.

She added that most people who got into trouble did so because of a change in their circumstances, such as losing their job.

A separate report by the National Landlords Association found that the lack of mortgages for first-time buyers, as well as the demand for higher deposits from lenders, meant that would-be buyers would rent for longer.

Posted at 08:21PM Apr 30, 2010 by Kelly Board in Mortgages & Housing Market  |  Comments[0]

BAA Announce Ash Bill

The volcanic ash cloud that disrupted travel across Europe cost Heathrow and Stansted £28m, according to BAA, the airports' owner.

The London airports were closed from April 15 to April 20 because of the travel crisis and Colin Matthews, chief executive of BAA, said the company was considering its options over the loss.

"It is too early to talk about precisely what we'll do and how successful we can be," he added.

 The European Commission estimates the crisis could cost the aviation industry more than £2bn, just as it is recovering from the worst global recession for 70 years, and some airlines have called for governments to provide compensation.

The eruption of Eyjafjallajøkull in Iceland was not the only external incident that has impacted BAA so far this year, with the Christmas Day terrorist threat in the US, snow, and strikes by British Airways cabin crew also affecting air travel.

"Aviation is unpredictable and 2010 has delivered a few surprises," Mr Matthews said.

BAA, as it reported first-quarter results for Heathrow and Stansted yesterday, said the adverse weather conditions and strikes caused the loss of 180,00 passengers. Without these factors, passenger numbers at Heathrow would have grown by 3pc in the three months to March 31.

Instead, the rise was 1.6pc, while Stansted's passenger numbers declined by 4.7pc. Overall, traffic reached 18.6m passengers, 0.2pc ahead of 2009.

Alongside a rise in the amount spent by passengers at the airports' retail outlets, this led to BAA increasing revenue by 5.5pc to £456.1m. Earnings before interest, tax, depreciation and amortisation and exceptional items (Ebitda) rose 3.3pc to £174.1m, but interest payments on BAA's net debt of £8.6bn helped to ensure the airport operator, which is owned by Spain's Ferrovial was unable to move out of the red. Nonetheless, pre-tax losses narrowed from £316.2m to £195.5m.

Mr Matthews said there were "encouraging trends" but trading was "not back to the levels of pre-recession".

 

Posted at 02:54PM Apr 30, 2010 by Marc Stenton in The Economy  |  Comments[0]