By Melissa García-Lamarca and María Kaika, University of Manchester, UK
In early May 2014, the Bank of England issued a warning: the increase in gross mortgage lending combined with a rise in UK housing prices place the country’s financial stability under serious threat. Indeed, the running figure for mortgage debt in the UK is alarming, sitting at over £1 trillion, as mortgage lending only continues to expand.
But the UK is not alone. While data from the European Mortgage Federation from 2014 reported the ratio of outstanding residential loans to disposable income for the UK at 116.4%, this figure was even higher in other advanced European economies: 237.4% in Denmark; 197,3% in the Netherlands; and 135% in Sweden.
At the aftermath of the US subprime mortgage crisis, the risk that escalating mortgage debt poses on the global economy has received increasing attention. However, the risk at the household level – the ‘lived’ dimension of the financialisation of housing – remains largely off the radar of both academic research and policy making (with a few notable exceptions like Desmond 2012).
In our recent paper titled “Mortgaged lives”*: the biopolitics of debt and housing financialisation, we consider mortgages as a tool that engineers an intimate relationship between global financial markets, and the bodies and lives of the workforce. Drawing upon ethnographic research and in-depth interviews with people affected by mortgage debt defaults in Spain, we show how mortgage contracts connect not only a person’s current and future income into global speculative financial strategies, but also tie the practices of everyday life into the very heart of financial markets. In other words, as housing becomes financialised, so does life itself. This process affects not only access to housing, but also the ability to care for oneself and others, perceptions of self-esteem, social status, class, citizenship and belonging in society.
By linking the changes in macro-economic processes that made mortgage credit broadly available to the experience of living a “Mortgaged Life”, our work explains how interest rates, the fluctuation of real estate prices and currency exchange rates became factors determining not only access to housing, but the very conditions and (im)possibilities of life. It shows how people begin to realise that they had never really been homeowners or middle class. Just a proletariat indebted for life to their creditors.
As the impact of mortgage debt defaults cuts across borders, educational, income, status, gender and age groups, there is urgent need to focus beyond the macro-economics of mortgage lending and into their personal, family, health and community impacts. This is of particular importance as products like 100% mortgages are reappearing on the market in the UK, and mortgaged homeownership continues to extend across the world as an increasingly common way to access housing.
For the time being, a continuous rise in housing prices, relative economic stability, low interest rates and relatively low unemployment keep mortgage defaults at bay in the European north. However, the combination of escalating housing prices, rock-bottom interest rates and extensive mortgage lending is a potentially explosive mixture not only financially, but also socially. Our paper seeks to highlight this reality, and to call for deeper attention and action.
*The paper (and blog post) borrows its title from the title of Ada Colau and Adrià Alemany’s (2012) book Mortgaged lives: From the housing bubble to the right to housing.
Colau A and Alemany A 2012 Mortaged lives: From the housing bubble to the right to housing available online https://libcom.org/files/mortgagedlives.pdf [open access]
Council of mortgage lenders 2016 Market commentary May 2016. available online at: http://www.hypo.org/Content/Default.asp?PageID=524
Cunliffe J 2014 Speech: Momentum in the housing market: affordability, indebtedness and risks Bank of England Available online at: www.bankofengland.co.uk/publications/Pages/speeches/default.aspx
Jamei M 2016 European mortgage federation: the voice of the European Mortgage Industry. Available online at: https://www.cml.org.uk/news/news-and-views/market-commentary-may-2016/
García-Lamarca, M. and Kaika, M. (2016), ‘Mortgaged lives’: the biopolitics of debt and housing financialisation. Transactions of the Institute of British Geographers, 41: 313–327. doi: 10.1111/tran.12126 [open access]
Osborne H 2016 Barclays 100% mortgage: how much does it really help homebuyers? Available online at: http://www.theguardian.com/money/2016/may/04/barclays-100-per-cent-mortgage-how-much-does-it-really-help-homebuyers