Cleaned out stables, property sanity?

As house prices in the UK soared annually for more than a decade, confident house-owners re-invested their “profits” from their homes into a place bigger and better, taking on greater financial commitments and working harder to meet the repayments, like mice on a treadmill.

It’s not worked, cue the current credit crunch and economic crisis that has seen property markets collapse in the UK and some other countries, like Spain…

Mortgage interest rates have dropped from 18% to the present zero percent, so isn’t it time to restore some sanity to the property market where house prices were growing at 10% a year in some parts of the UK and are now in reverse gear.

Measuring the family worth against the value of the family home and going on a spending spree on the strength of the assumed selling price has proved to be disastrous and a big factor of the current economic crisis.

The reckless mortgage banks are going to be reigned in by Governments, even when they start lending again on any scale, and this probably means a minimum deposit of 25% for all buyers, a good benchmark on whether the planned house purchase is really affordable.

If interest rates can be kept really low, this means lower mortgage repayments and increased spending power to help revive the economy and replace the lost jobs.

Sounds simple and should work, remembering the current recession was caused by reckless banks doing dodgy deals they didn’t really understand and the s0-called light-touch regulators letting them get away with it.

If the G20 Ministers decide to start from economic ground zero and begin cleaning out the Augean stables of the guilty banks and regulators that could be the signal for house-owners to follow suit. A house that is a home rather than a wealth generator, as recognised by families in America and most European countries, would result in more disposable income and a better lifestyle for Brits.

And if they do want to buy another property in the UK or a tempting second home in a sunshine state like Spain, the prices would likewise be lower and not driven ever higher as in the last decade. They are plenty of well-built, key ready bargains in Spain at prices on average 25% lower than the peak of two years ago.

Long may that remain the case, long might sanity be maintained as a result?

The BBC have good economic coverage listen to the latest.