Requiring 20% down to get a home loan wouldn't be a bad thing

Duncan asks whether it's a good thing to require buyers to put 20% down before qualifying for a home loan. He's asking not if it would be a good idea to suddenly put this kind of rule into effect now, but whether it would be a good idea "in more 'normal' times."

Well, it's been the general rule in France for decades. And France seems to not be suffering as devastating a financial crisis as the U.S. or the U.K. Last September, the BBC reported that in France, "it is very difficult to spend money you do not have." For one thing, French credit cards usually work more like debit cards -- or like old-timey American Express cards, remember those? Where you had to pay the balance off every month. And for another thing, mortgage lenders not only require a down payment of 20%, but they also won't negotiate a loan where the payments exceed 30% of your income. The result is that under 60% of French people own their own homes, and economic growth in France is much slower than it is in the U.K.

But let's not beg the question that this slower rate of economic growth is a bad thing. If the U.K.'s economic growth has been measured in terms of its people spending on credit, then who cares if the French economy is considered comparably sluggish? As someone who got her mortgage only because of the housing bubble (considering my income at the time I bought my home, I think my lender must have been tossing notes hand over fist to Crazy Eddie's Subprime Loan Emporium), I'm not sure I wouldn't prefer living with a slightly sluggish economy over living in a country where the foreclosure crisis has been immortalized with the World Press Photo of the Year 2008.

It should be understood, of course, that France does consider itself having gone into a recession at this point (français). But the news reports I've seen indicate that they figure they're not doing as badly as the U.S., Japan, and Germany. There's a conference in Brussels at the end of the month; with any luck there will be some American media there to actually report on the state of the EU.