Your Money: Societies have room to rent

ANYONE who wants to borrow most of the value of a house or flat is going to find building societies more and more reluctant to make high percentage advances.

Currently, loans of up to 95 per cent qualify as 'normal' as far as the societies' regulations go. But any larger advances have to be backed by extra cash.

Rosalind Gilmore, the Building Societies Commissioner, said last week that she planned to change the rules to take the norm down to 90 per cent.

The larger societies murmered that it would not alter things as they were already curbing large loans.

The insurance companies that write the policies (paid for by the home buyer at the outset) that guarantee the societies against losses had already seen to that.

But at the same time, Mrs Gilmore reminded societies that people do not come in neat two-by-two packages. Their lives are not mapped out from the moment they step into their first job, and nor should they be. People live together, split up, lose their jobs, go back to college; households change, incomes change and life is generally less secure and less predictable.

Mrs Gilmore told building society executives that they have a duty to these floating people as well as to look at their balance sheets.

But the gung-ho attitude of piling on debt that was perfectly sensible when inflation would erode a massive burden into a manageable load, and before long into a flea bite, has changed. A whole generation of young people who, in the 1980s, would have been buying their first homes have seen too many people trapped.

When you are young you realise that life is changing. A new job may take you to a new town, or a new country. A new girlfriend, marriage or the end of an old relationship means a move is imperative.

If there are no easy profits to be had by buying then what makes owning your home better than renting?

At the moment the quality of rented property is, to put it politely, patchy. But the expanded role of housing associations, a little kick from the Business Expansion Scheme, and the obvious solution of renting out a property that you cannot sell are expanding the rental market.

The initial deposit on a rented house or flat is not likely to be crippling. In contrast, the new policy on mortgages means that for the average first-time buyer paying pounds 45,334, the 10 per cent deposit is a hefty chunk. In the South-east and London, the sums are more daunting.

But Halifax says first-time buyers are already borrowing a shade under 90 per cent. Perhaps the current crop of buyers have had longer to save up than usual as they have sat in their parents' homes or rented accommodation, watching house prices dribbling down like raindrops on the window pane.

But they are also likely to have seen the consequences of debt piling up, and know that they need a safety margin to ensure the exit sign stays lit. Even so, the sign may not point to freedom if the property is hard to sell.

For many, the market in property has let them down and they cannot sell at anything they regard as a reasonable price. But renting is not a panacea. There are even more pitfalls, involving greedy, lazy or careless landlords.

If building societies are beginning to think of expanding their role as landlords, which was thrust upon them in a tiny way as part of the mortgage rescue schemes, this should be applauded.

Perhaps Mrs Gilmore can reconcile the seemingly opposed desires to make societies tough on lending, and socially responsible as befits their roots, by developing a rental side alongside the traditional financing of owner- occupation.

THE knock-for-knock convention in which motorists whose bumpers have more than kissed pay their own costs is about to get knocked on the head.

General Accident and Norwich Union have quit, and newcomers like Direct Line with sassy computer systems have never played the game designed to mete out very rough justice and save the insurers bother.

But there will still be rule- of-thumb guidelines to apportion costs - but this time based on who is most to blame.

So if you career into the back of a parked fancy car in your beaten-up old Mini, it will cost you - or rather your insurance company - dear.

The new system will not be beyond reproach, but at least the rough justice has been considerably planed down.