Why we need a public-interest property ad campaign
Opinion: What every house buyer should be told
‘Start by defining a safe level of borrowing, as a percentage of household income (not the maximum amount, the safe amount)’. Photograph: Getty Images
Back in the 1980s, when I was a silly and skint student who couldn’t drive and frequently missed the last bus home, I saw an ad on TV that ended my habit of cadging lifts off anyone, anyone at all.
It ran on RTÉ and showed someone putting bullets into a gun. The message delivered in a sombre voice by the narrator: someone who drinks alcohol and gets behind the wheel of a car is like a lunatic with a loaded gun.
In an era when so-called adults cheerfully insisted that a few drinks improved their driving, the ad convinced me that taking a lift from one of them was beyond stupid. Seems obvious now, but it didn’t then, until this public-interest ad flicked a switch in my brain.
These days, of course, we see similar ads all the time, put out by organisations that have our welfare at heart. There’s that one where the guy who lost his arm in a farm accident talks about what machinery does to a limb. The one that tells you how to barbecue safely. The one that shows the correct way to drive through a roundabout.
So why, after the worst property bust in history, haven’t I seen any public-interest ads on telly warning people of the risks of buying a home, and especially the risks of borrowing money to do so?
Maybe the powers-that-be assume the risks are obvious. For years it’s been impossible to switch on talk radio without hearing miserable unfortunates say they had no notion their lender was unregulated / didn’t know they’d still owe money even after they relinquished their over-mortgaged house / are gobsmacked their lender could veto a deal to sell their property at a loss.
Economy collapsedAs my teachers used to tell me in secondary school, to assume makes an ass out of “u” and “me”. Given that our entire economy collapsed after a binge of, ahem, ill-advised property loans, it’s in the nation’s interest to make sure the next generation of borrowers is informed and rational – as supposed by free-market economic theory. And especially as the property market, having mouldered for several years in an unmarked grave, may be reviving.
Who should pay for a public information campaign? I say put the squeeze on all the parties who failed to call a halt last time out. The Department of Finance? Absolutely. The Central Bank? Yep. The Financial Regulator’s Office? Goes without saying. And, of course, the devil-may-care banks we had to bail out. Hey, maybe the European Central Bank could kick in a few bob. They love telling us what to do.
The information campaign should be run by an organisation we can trust, such as the Money Advice and Budgeting Service or the Free Legal Advice centres. The possible topics are endless.
Level of borrowingStart by defining a safe level of borrowing, as a percentage of household income (not the maximum amount, the SAFE amount). Go on to explain who your jovial local auctioneer represents (clue: not the buyer). Give tips on how to test whether a price is fair. For example, dividing the purchase price by the potential annual rent will give a price-to-earnings ratio, a valuation technique used in other financial markets.
And let’s not forget apartment buyers. Explain what management companies and fees are, for example, and how to find out if an apartment has sound-proofing.
There’s no harm in emphasising that, unless you pay cash, you’re not buying a home but a financial instrument called a mortgage. Describe the pros and cons of different kinds of mortgages. On a standard variable rate mortgage, for example, look at whether a borrower’s monthly payment must go down when the ECB lowers its interest rate (no) or up if the ECB raises its rate (no, but it will).
Warn buyers eyeing up an estate to ask whether it’s been taken in charge, what that means, and how to double-check. Oh, and if they fancy a home facing a green, explain how they can find out who owns the green and whether a builder can seek planning permission to build on it.
It should be all about advising buyers, and especially borrowers, how to protect themselves from financial disaster – and, in the process, protect the rest of our economy.
Banks are back in the game, with one heart-warming ad showing Mum and Dad living with in-laws who frown on canoodling. So they go hand-in- hand to confide in Mr Friendly Banker, who sends a letter saying YES! Cue elation all round, as miniscule type with the caveats that borrowers actually need to know race by underneath.
How about a public-interest ad showing Mum and Dad a few years on, when they split up and learn they are both, individually, responsible for the entire mortgage, even if one of them is unemployed and the other has moved out? Oh, and the lender won’t let one of them buy out the other.
Let’s make sure all home buyers know the downsides as well as the upsides. This time.