I am giving advance warning of a change to my expectations for the bottom of the housing market.
It is being reported that the FSA are going to impose a cap of 3 times income as an affordable loan. I happen to agree with them, but this should have been implemented before the housing boom.
Actually I don't agree with them! I agree that lending should be in the region of 3 times income, but I don't think legislation should be introduced to make it so.
Anyway I have had a target for the bottom of the housing slump of £140,000 average house price according to Halifax in Q4 2009 for several years now. I have based this timescale and figure on various factors, but one of them was a return to lending of 4 times joint income.
This 4 times figure was still higher than the 2.5 times figure used pre Gordon Brown 'debt is good' mantra, but higher than the suggested figure of 3 times.
This 3 times multiplier would have the effect of reducing my target from £140,000 to £100,000 and the bottom of the market would slightly move to Q1 2010.
I was leaning towards a Q1 bottom before this news but this makes it 100% clear.
So to clarify - if new lending is restricted to 3 times income, then my target for the bottom of the housing market is £100,000 in Q1 2010 according to the Halifax figures.