While it is right that he is devoting time and attention to the housing crisis currently playing out across the UK, his Chancellor of the Exchequer, Alistair Darling, has little idea of the idiosyncrasies of the market and the way that it operates.
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Suggesting long-term fixed rate mortgage deals is all well and good to provide stability, but the truth is that no one can truly plan 25 years ahead. While most businesses have a two or five-year strategy, for individuals, setting up a 25-year plan is simply not possible. In this time circumstances will inevitably change. For those tied to two or five-year deals the impact on circumstance changes will be felt, but negated by the relative short term of the deal. However, for longer terms, if the borrower experiences a period of unemployment or cash flow problems then he is stuck. What then? Will the government take the blame for suggesting such a move? I doubt it. Instead the government will probably keep quiet and hope it blows over, or attempt to sweep it under carpet.
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While Brown and his government should be applauded for at least putting housing near the top of its agenda, the proposals being set in place, are only raising eyebrows within the market. How can we, as responsible intermediaries, suggest that a 25-year fixed rate mortgage is the right thing to do? Yes, the borrower is certain of their payments each month, but what if house prices fall? They could end up paying too much. What if their circumstances change and they can’t afford to pay the mortgage? Will their property be repossessed?
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The government should not be focusing on the advice given – let us get on with our jobs. Instead, Brown should be promising to increase the number of properties being built. That is the only true way to help the market and until Brown and his re-jigged Labour Party realise the fundamental change needed to the UK housing market then I can only see the problems continuing.
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