Casino Capitalism and the British Culture

In preparing for the speech of Vince Cable, being delivered this evening at the Financial Services Club, I have been reading his book the Storm: The World Economic Crisis and What it Means.

It seems rather clear of our mania with using property to make money when you summarise the figures Mr. Cable presents in the book as background to the crisis:

• In July 2007, there were 15,600 mortgage products in the UK

• Data Monitor estimates that 7% of mortgages were made to people with poor credit history and 5% or more were ‘self-certified’ where no proof of income is given

• 10% were held by buy-to-let mortgage holders, compared to under 1% a decade before

• 276,000 houses were second homes in the UK plus another 200,000 second homes overseas

• 30% of the increase in UK house prices (and Ireland and the Netherlands) between 1997 and 2007 could not be explained by the ‘fundamentals’ – population rises, rising incomes and lower interest rates – according to the IMF ... in other words it was just people expecting to make a buck

• 20% of house price rises in France, Spain and Australia and 10% for the USA could also not be attributed to the fundamentals

• Average UK householder debt doubled during this period to 160% of income

• The average size of a mortgage increased from £40,000 in 1999 to £160,000 in 2008

Lots of food for thought there but I doubt we will get into another mad mortgage market like that again ... at least for a couple of years anyway.

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