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Irresponsible to encourage this crazy housing market
• Your story (Housing body comes under fire, Nov 30) that social housing tenants are to be encouraged onto the property ladder using public subsidy under the government's new Social Homebuy scheme in 2007-08, is alarming given the current state of the market.
According to a recent report by David Miles, chief UK economist at Morgan Stanley, more than 50 per cent of the doubling in house prices in the past decade is attributable to speculation.
As a result, in his view a significant UK house price crash will occur in the next few years "once price rises fail to meet expectations".
Data on current earnings and house prices from the Office of National Statistics and the Land Registry highlight the absurd levels of borrowing required to secure a home in Camden. Those earning the average annual wage for the borough of £32,764 must now borrow 12 times their salary to secure a mortgage on an average priced home here.
Indeed, the Financial Services Authority has already warned lenders offering large income multiples to homebuyers to stress test their loan books to make sure that they would be able to survive a 40 per cent fall in house prices.
This is clearly a disaster in the making for all but the richest of speculators and, as by definition social housing tenants are on more modest incomes than the average, falling house prices will have a disproportionately pernicious financial impact on them.
How will social housing tenants benefit by buying into such a grossly inflated market? Aren't taxpayers in fact going to end up supporting the banks rather than anyone else through this scheme as lenders will continue to rake in inflated mortgage payments long after negative equity bites?
Encouraging social housing tenants into a grossly inflated market is profoundly irresponsible.
SUSAN CASEY
Portpool Lane, EC1
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