Reader's letter of the day

From today's FT:

Sir, With reference to Mark Clare's letter* "House prices are crucial to UK's fortunes" (December 1): certainly they are, and the sooner prices drop another 30-50 per cent** the sooner life will return to normal. Mortgage finance is not the issue; affordability is.

Until house prices are at a price where a 75 per cent mortgage can reasonably be expected to be repaid over 25 years out of tax-paid income there will be no return to normality. The days of housebuyers gearing up on the basis of their increased equity to buy a bigger house are over, and I cannot see many buyers for a house costing more than £600,000 after they have paid 45 per cent tax.

It has to be either house price deflation of income inflation. Please hurry up and make up your mind.

Michael Brooke, Ross Brooke Chartered Accoutants, Newbury, Berkshire.

* Mark Clare is Chief Executive of Barratts, so you can guess what his spin was.

** Here's that chart again (for full explanation see here), average house prices since 1952 adjusted for wages growth, which shows that a further one-third fall from current average value of about £150,000 is not unlikely (click to enlarge):