The wrong winners

The property section in today's Times features a gent who says he doesn't want to be smug, but he's coining it in. He's a buy-to-let investor whose interest-only tracker mortgages are costing him less and less as interest rates continue to tumble. Earlier in the week the Telegraph's Alex cartoon, always down with the zeitgeist, showed two middle class couples at a dinner party, bragging about how low the tracker mortgage payments were on their second homes in the Cotswolds. And just weeks ago, the charming Rosie Millard revealed to the world that she had bought a million pound home at auction, taking advantage of the widespread distress in the property market.

Back in the real world, today's Times also includes a despairing letter from the parent of a young man whose mortgage lender has just demanded full repayment within thirty days, despite the fact that the mortgage is fully up to date (and has indeed been partly prepaid). The lender has offered no justification for the action, but is not prepared to reconsider. According to the Times' lawyers, the lender is fully entitled to do this. More generally, first time buyers and existing homeowners who are teetering on the brink of negative equity are still finding it hard to get fianncing. Meanwhile the well-off, fed up with the lows returns on saving acoounts and worried about the stability of the financial system, are back to the old game of remortgaging the family homestead to buy additional properties as investments.

Is there anything in the preceding paragraphs that's not thoroughly dispiriting? Before the credit crunch hit, it was apparent that easy money was distorting the housing market. Lo and behold, today's record low interest rates are doing more of the same. The proportion of people in the UK who own their own home is falling for the first time in a generation, and it looks as if the credit crunch is set to prolong that trend.

There's another aspect to this that bothers me too. The UK banks that got into trouble (aside from Lloyds TSB, which is a different story) were all characterised by their high dependence on wholesale deposits to fund their loan books. If low interest rates continue to discourage savers, it will be difficult for the banks to return to a more stable funding mix. This will make them vulnerable to further problems in the future. We may need low interest rates for now, but we should hope to see the back of them as soon as possible. Sorry, Rosie.