evidence to Treasury select committee
james36armstrong at hotmail.com
Tue May 1 13:33:33 BST 2007
the following has been sent to the Treasury Select Committee
PROFESSOR NIELL FERGUSSON
Talking of the problem of America's chronically unbalanced domestic
finances , the New York University professor of financial history and
senior research fellow of Oxford , Niall Fergusson , says
"The magnitude of the problem is such that most Americans including those
who consider themselves well informed about the nation's finances , find it
quite simply incredible. Indeed the main reason why America's fiscal crisis
remains latent is precisely that people refuse to believe in its
In UK the same is true of the consequences of the housing crisis. People,
whilst wondering at the phenomenon of out of reach and still rising house
prices and the endemic low supply of new houses, refuse to believe in its
This paragraph is an attempt to make the housing crisis real to the reader,
preparatory to identifying the parties who cause it and establishing the
methods to cure the problem.
BUYING THE LAND UNDER A HOUSE
A patch of the best grade 'A' agricultural land, big enough to fit a house
on has an average value of £175.
When it gets planning permission for building a house (before the digger has
moved in ) it is worth
When you subsequently take out a mortgage to pay for the house built there
you have to pay back in interest and repayments over twentyfive years, £
133,000 - and thats for the site and is additional to paying for the
mortgage for the bricks and mortar of the house itself.
BUYING THE HOUSE
The price of an average house is £200,000. The average mortgage taken out
is 80% of the house value.
Mortgage lending has now reached astronomical and unsustainable levels in
terms of both
personal finance and in the level of stress to meet the repayments imposed
on people in terms of work, travel and accomodation, or even to secure
accomodation or contemplate such commitments.
On this anomaly rests our banking system, much of our economy and the credit
boom . On such foundations rests our housing crisis. This involves the
credibility of our financial regulatory system, of our financial
institutions, and of the integrity of successive governments and brings into
question the meaning of our 'democracy'
The parties causing this anomaly are identifiable, as are the means of
reforming the market, but until the scale of the problem is acknowledged
this crisis is a latent threat to national financial and political
stability. James Armstrong. 30th April 2007
(contributor to The Barker Review)
"The Rise and Fall of the American Empire" p 262
Halifax Building Society
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