Taxpayers face being on the hook for billions of pounds’ worth of mortgages under a “generation buy” scheme being considered by the government to get young people on the housing ladder.
Boris Johnson is reported to have asked ministers to devise plans for long-term fixed-rate mortgages with a 5% deposit. This could require the government to take some of the risk from lenders through a form of state guarantee — sparking concern among mortgage experts.
Sigh. Subsidising people who shouldn’t be buying houses into buying houses is not a good idea. That they shouldn’t be buying houses is proven by the fact that, without subsidy, they can’t afford to buy a house.
Sure, economics can be complicated but sometimes it’s really damned simple.
A large part of the cause of the housing bubble in the U.S. in that burst 2006-7 was the gov’t “encouraging” homeownership. Homeownership is good, therefore, more homeownership equals more good. And once the various programs were ramped up every dumb idea imaginable, not to mention a fair amount of fraud, was off and running.
They might get the student loan company to run it.
Just like those dodgy mortgages Bill Clinton encouraged financial institutions/pension funds to offer poor black Americans – loans that were then packaged and sold on, providing a catalyst for the 2008 debacle. This is where BLM leads.
Why would anyone want to have another 2008?
Exactly similar to the so-called “furlough” wheeze.
Buying the voters.
“Just like those dodgy mortgages Bill Clinton encouraged financial institutions/pension funds to offer poor black Americans”
“Encouraged?” At gunpoint! Janet Reno ordered them to make the loans or she’d shut them down.
This is effectively a mortgage indemnity scheme. 45 years ago when I bought my first house I had a 95% mortgage. I had to pay a mortgage indemnity premium to indemnify the building society if I defaulted and and they subsequently had to sell the house below the outstanding amount of the loan.
Why can’t people who want 95% mortgages pay their own mortgage indemnity premium? Why do I have to pay it through my taxes?
But Boris is a libertarian conservative? Isn’t he?
Politicians never lose an opportunity not to learn from history.
Is it stupidity, cupidity, ignorance, or malice?
Clearing out some old papers I found the 1985 acceptance letter from Nationwide for my first mortgage. Standard rate 14.75% plus an extra half percent for high loan to value as I could only afford a 10% deposit. That was for an endowment mortgage, doubtless repayment would have been at least another percentage point or two.
I plan to email it to any young relatives who start complaining about how tough they’ve got it.
That should move the Great Housing Price Crash a year earlier & 50% deeper. Thanks Boris? You’re a gentleman & scholar. (Said he who doesn’t own UK property but might like to)
This is an attempt to square a circle. It will of course fail.
For the good of the country, younger people, and the Conservative party it is essential that people in their twenties can afford homes.
The obvious way to do this would be to lighten or remove the planning laws and get a lot more homes built.
Trouble is that would reduce the price of existing property and thereby upset a very large number of existing Conservative voters, as well as causing significant distress to those who have recently taken out a large percentage mortgage and to the lenders who have depended on maintaining the value of the houses to secure the loans.
So an attempt is being made again to reduce the cost of buying housing for new entrants without reducing the value of existing housing. It won’t work.
If I were HMG I would rip up the planning laws and maybe have some built, and sweeten the bitter pill for householders and lenders by undertaking to buy any property at its actual purchase price if it was bought prior to the removal of planning laws- any houses thus purchased to be sold to the public. That would prevent negative equity which we know is damaging to both borrowers and lenders, whilst reducing housing costs all round.
Pat,
One hell of a lot more homes are being built. If we could just do something about the net 300,000 enriching our country each year some of those homes would stand a better chance of being affordable to first-time buyers.
But Boris is a libertarian conservative? Isn’t he?
Boris is whatever Boris needs to be to further Boris’s career.
But perhaps these youngsters leave those silly socialist ideas behind if we just support them in becoming homeowners…let’s give them an equity stake in the society and they’ll soon be small c conservatives albeit still passionate about things that matter, like fighting climate change and racial inequality.
Who knew Boris Johnson was going to turn out to be a wog version of Jimmy Carter? I didn’t have a whole lot of faith in him, but I didn’t see him turning into Carter, that’s for sure.
Why would anyone want to have another 2008?
Evidently Boris and the Tories slept through 2008.
But it proves the old saw… Whatever stupidity septics engage in, wogs are sure to follow.
@John
“Clearing out some old papers I found the 1985 acceptance letter from Nationwide for my first mortgage. Standard rate 14.75% plus an extra half percent for high loan to value as I could only afford a 10% deposit. That was for an endowment mortgage, doubtless repayment would have been at least another percentage point or two.
I plan to email it to any young relatives who start complaining about how tough they’ve got it.”
I bought in 2001 – and I calculated that if interest rates had stayed the same since 1997 and prices risen with inflation I would have paid 33% less pcm in my mortgage.
High interest rates should really motivate probate sellers and distressed sellers to sell quickly and compromise on price , that is my theory. However the percentage of young people who buy has dropped in the last 30 years but so have interest rates, so obviously lower interest rates have not helped (obviously there are other factors).
Blojerk believes that printing funny money is as potent as God’s power to resurrect Jesus. He thinks it can be printed up without limit and trillions are just numbers.
Venez etc didn’t get away with it–I don’t think Blojob will be able to either.
It mentioned ‘long term’ any plans to have much longer mortgages as the Japanese have.
Would be interesting to see the impact of allowing 50 year term mortgages
ISTM, the problem with the housing market is on the supply side, but this “remedy” is on the demand side, making the whole thing worse.
Boris is whatever Boris needs to be to further Boris’s career.
How much further can it go?
PM is pretty much the pinnacle.
After this it’s easy street of well paid after dinner speaking to compensate for all the regulatory favours done while on office, that totally weren’t done on a quid pro quo basis you understand…
@ David
Yes: obviously there are other factors. One is a housing shortage caused by planning restrictions and mass immigration under New Labour. The number of people born abroad increased by *three million* between the 2001 census and the 2011 census (that is a net increase after a few people re-emigrated and quite a lot, probably 10% of the starting number, died). So demand exceeds supply and prices go up until enough people are squeezed out of the market. The lower the interest rate the higher the nominal price needed to squeeze enough would-be buyers out of the market.
Another is Capital Gains Tax that, thanks to Gordon Brown, is levied on purely notional gains resulting from “inflation” (debasement of the currency) and applies to almost everything except owner-occupied houses so they, like gold, are seen as a safe haven in times of inflation. A third is the fear of a “Wealth Tax” which all rational people agree should not be imposed on, as it cannot be collected on, owner-occupied houses. These generate “investment” in houses.
There are other factors as well, but those are the easiest to mention.
Ummmm, I think in Sweden they have mortgages which they never pay off, no maturity. The Finns are very jealous of that system, “Come on man, why do we have to get bogged down with these repayable mortgages?”
@John, I agree with you. So to me high interest rates and low immigration is better for house buyers than the reverse. Thanks again Tony and Dave for messing up the country!
How could 50 or even longer term mortgages change anything? True with ultra-low interest rates the repayment element is more significant, but so long as prices keep rising that does not matter, there is a capital gain to clear the mortgage. And so the bubble continues.