Redrow chairman criticises 'mortgage famine'
Thursday 04 November 2010
The boss of one of Britain's biggest housebuilders today hit out at regulators for creating a mortgage famine and risking the economic recovery.
Requirements that banks should be forced to hold on to more of their money and proposals for new rules on mortgage lending are stifling the housing market, said Steve Morgan, the founder of Britain's fifth biggest homebuilder Redrow.
"Our message to the Government is simple: the regulators are going too far and the medicine risks killing the patient," he said. "A generation of young people are being denied the opportunity to buy a home and that's not fair."
Mr Morgan claimed that a "mortgage famine" had been created in the UK because lenders were subject to new international rules that banks should be forced to hold on to their cash, and part-nationalised lenders were preparing to repay loans to the Government.
As a result, mortgage lenders were increasingly risk averse and were insisting on deposits of 25% or more, an unrealistic amount of money to expect most first-time buyers to stump up.
The situation could be made worse under the FSA's proposed tightening of the rules that would impose tougher affordability tests and limit interest-only mortgages.
"Every week we are forced to turn away potential purchasers simply because they do not have a deposit of 25% or more - people with excellent jobs who under normal circumstances would easily qualify for a mortgage," said Mr Morgan, who also owns Wolverhampton Wanderers Football Club.
"The case for resolving the mortgage crisis is compelling as we cannot have a buoyant UK economy without a healthy housing market."
The number of mortgages available to buyers with deposits of 10% or less has fallen from 1,244 to 33 in the last three years, he claimed.
He called for lenders to return to asking for deposits of 5%, which he claimed would stimulate demand for new homes, create some 600,000 new jobs and deliver further taxes to the Government.
The chairman of the Flintshire based company accused the Government of deliberately suppressing the housing market, which was "laying the foundation for the next boom/bust cycle".
The Government should offer financial guarantees to lenders to encourage them to offer mortgages at more favourable rates of interest to people with small deposits, he said.
His comments come as new figures released today from the Halifax show that the average price of a home rose by 1.8% in October but the number of transactions were at half their normal level.
But Mr Morgan said house prices had actually been very stable over the past year and that fluctuations indicated by surveys were caused because of the small number of transactions.
Despite the mortgage drought, Redrow's turnaround continued, as a result of building more expensive family homes Mr Morgan, told the company's AGM in Flintshire today.
Sales of homes in the 18 weeks to the end of October were up 9% year-on-year to £133 million.
The average price of homes sold by Redrow was up 16% from a year ago to £174,000.
Redrow currently owns enough land to build 13,000 plots, which will secure its supply of new homes for the next five years.
It made pre-tax profits of £700,000 in the year ending June 2010 - its first profit for three years. It had made a loss of £44.2 million in the previous year.
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