Your Money: Rating people carries risks

Click to follow
The Independent Online
MORTGAGE lenders are in danger of getting themselves into an awfully sticky patch now they have started to talk about risk-rating people rather than loans.

The Bristol & West Building Society has been combing through its lengthy arrears book to discern threads that might prove predictive. It seems the younger you are, the more likely you are to miss mortgage payments, and married couples are more reliable than cohabiting couples or friends sharing a mortgage.

But is that sufficient justification for punishing perfectly upstanding (and lucky) young single people who want to take out a mortgage and can afford to make the monthly payments? It is the red-lining argument of 20 years ago all over again.

That was when the lenders took a geographical view of their bad debts and started drawing no-go areas on the map. But once this was out in the open, the building societies started to beat a hasty retreat, and suddenly nineteenth century houses in run- down areas became reasonable propositions.

It was impossible for an individual to argue against the sweeping generalisation that people in those areas or types of properties tended to be bad payers, in much the same way that young single people cannot refute the assertion that they look like the bad payers already on a building society's books.

But there may be something peculiar about the generation struggling on the bottom of the housing ladder at the moment.

Many of the young single people slithering off the bottom will have rushed into home ownership in 1988 to try to beat the ending of multiple mortgage tax relief, after the then Chancellor Nigel Lawson gave an unhealthily long warning period of the cut-off date. We can now see this was the apex of the house-price boom.

Lovers and friends got together in hasty menages that did not last.

In 'normal' circumstances, this would not have mattered. They could have sold the property, split the profits, and gone their separate ways.

But falling house prices halted that easy option. So those young people who would otherwise have been perfectly reliable payers month after month got into arrears, because in some instances the partnership broke up and one person was left shouldering a burden designed for two or three.

Anti-discrimination legislation has at last begun to sink into the national psyche, so that a blanket policy against single men, people under 24, gays or trick cyclists propagated by lenders would just not be acceptable - however justifiable according to past experience.

But we have become relatively comfortable with credit scoring for pounds 500 of credit on a plastic store card, so it seems odd that a few more questions for a pounds 50,000 loan stretching over 25 years should rankle.

The standard credit-scoring system marks down applicants who rent their home (however swanky), and there is little redress against a refusal. The mortgage lenders are trying, however ineptly, to find a middle way between accepting an applicant at the finest rates, and refusing a loan altogether. The self-employed already accept that they are open to more questions and are prepared to pay a marginally higher rate for their home loans.

If the lenders stick to clean, clear-cut financial criteria, such as the size of the deposit, they can probably achieve the same ends. But crass generalisations about people's lifestyle being a bar to a standard mortgage will not wash.

Remember the pub that increased business by throwing out the notice saying there would be a 10 per cent surcharge on meals taken between 1 and 2pm, and instead put up one offering discounts for meals ordered before 12.30 or after 2pm.

THERE is more than pounds 10m in premium bond prizes waiting to be claimed.

But don't be tempted to ring one of the premium-rate telephone services that offer to hunt the lists on your behalf. While you listen to a gentle voice droning on and reading out the numbers of the top seven unclaimed prizes, you could easily clock up pounds 2 for the premium-rate call.

National Savings says it can do nothing about these telephone services. It does not have any copyright on the winning numbers, which are freely available in the London Gazette.

But next time you visit a main Post Office you could look through the alphabetical list of unclaimed bonds yourself, absolutely free.