Thursday, March 21, 2013

Plan B - "Reinflate The Housing Bubble !"

George Osborne is the Son Of Brown :
"George Osborne is going into the mortgage business. What could possibly go wrong?

...(the taxpayer) is to underwrite £130bn of mortgage loans. They, or we, will pick up the tab if the borrower defaults. This will give banks the confidence to accept smaller deposits of, say, 5 per cent, meaning the borrower can borrow more. It is not hard to see how this will encourage struggling banks to get a racier appetite for risk. Imagine the discussion between the buyer and the mortgage adviser: "Oh yeah, it's underwritten by the government, borrow a bit more!" This is supposed to be the way out of a private and public debt crisis.

Remind me, how did the country get into its current mess in the first place? In America both political parties connived to loosen the lending criteria until anyone who wanted it could get a dodgy loan to buy a house. In the UK too, a private sector debt bubble was facilitated by a cheap money policy encouraged by the government. Combined with financial engineering by the banks, and the financialisation of the economy, the UK economy was made very vulnerable to an international shock. Once again, a big gamble is to be made based on pumping up the housing market."

There's no doubt that this will do wonders for buy-to-let landlords, who'll be able to buy new places to live in while renting out their existing residence (the loans are ostensibly not for buy-to-let) - and that's just what the British economy needs, after all. One wouldn't want the average house price to be affordable by the average earner, would one? As the BBC said this morning, it'll aid "recovery in the housing market" - and recovery is a good thing, isn't it?

In other news "Recovery in the fuel market", "Recovery in the food market", and "Recovery in the energy market"!

Oh, and along with handing over 20% of the price to housebuyers, the taxpayer will be on the hook for a chunk of any losses on the loans (losses to the lenders, of course - who else?) in the event of a US-style price meltdown. Altogether now :

"Privatise the profits -  socialise the losses !"

Obviously we'll need a bit of extra demand to keep rents up, too - so don't expect immigration to come down any time soon - or any time at all. Oh, and that inflation "target" that they don't take any notice of ? Well, they're going to take even less notice of it in future !

I guess this is all of a piece with previous policy, and will continue to drive the remorseless widening of the gap between the elite and the rest of us.


BenSix said...

Can't we just feel happy for the people who are doing well?

No? Oh. Fair enough.

perdix said...

The scheme does not apply to BTL -read the document.

Anonymous said...

You're mad if you really think there is a plan to 'drive the remorseless widening of the gap between the elite and the rest of us.'

It's all about the electoral cycle. They have to get reelected every five years, so they bribe people with their own or other people's money.

You used to be a favourite blogger of mine, Laban, but you seem to be regressing to the leftism of your youth.

Anonymous said...

No, I don't think there's a plan. It's just that when all your advisers come from what Charles Murray called "a cognitive elite", it's no huge surprise when it just so happens that their ideas and recommendations, whatever harm they may do to other groups, don't harm that cognitive elite.

I actually thought the rest of the Budget was bearable, given the constraints - although don't get me started on energy policy, for which Labour are chiefly to blame but which Cameron also seems clueless on.

But the idea that what we need is an increase in house prices ... well...

(don't worry, if Labour were in power I'd be even worse ...)

Mark said...

'They have to get reelected every five years, so they bribe people with their own or other people's money.'

Anon 7.08pm- the maximum Right to Buy discount in London is to rise to £100,000, according to the supplementary small print. Not only is that senseless, it would appear that Osborne reckons that bribing West African traffic wardens with London council tenancies is the best way to boost the Tories' 'ethnic vote'. This is economic and political short termism of the worst kind.

JuliaM said...

"I actually thought the rest of the Budget was bearable, given the constraints..."

Me too, but this nonsense sadly more than cancels it out.

Anon @ 7:08pm, come again? You think it's 'leftist' to oppose the government setting up a UK Fannie Mae & Freddy Mac? WTF?

Ryan said...

"There's no doubt that this will do wonders for buy-to-let landlords, who'll be able to buy new places to live in while renting out their existing residence"

I think you will find that the reason why middle-class couples have become buy-to-let landlords is because they already have enough equity in their existing property to be able to give themselves a leg up in the property stakes that allows them to leap-frog the young couples that want to buy and don't have the deposit. Once these middle-class couples have bought up all the housing they can then screw both private renters and those on housing benefit.

By this means places with high unemployment like Newport seem to have astonishingly high rents - largely because the great mass of unemployed can't move out of Newport and are stuck in a situation where the best way for them to get a life is to get pregnant and force the local council to give them housing. By doing this at 15 they can go further and ensure that they go straight from school to a new home without ever having to worry about getting a job of any kind. Thus the council has to pay for all these young people living alternative lifestyles on the state by giving them houses. They don't have council houses anymore so they have to rent them - and they rent them at the going rate which means whatever rate the middle-class buy-to-letters set for them. Newport is one of the best places to pull this cunning trick as the price of flats is low (no local demand because nobody locally has the money to buy) but the rents are very high so the return is fantastic - and underpinned by government policy which is bound to last both through this government and certainly through any future Labour government. There is no downward pressure on rents at all - the local council will simply pay what they have to pay.

Of course, new immigrants have exactly the same rights as UK citizens. Maybe the immigrants are "working hard, unlike the lazy Brits" as they like to inform us with their casual racism, but they are working at Starbucks for £6/hr. Think you can get a house on that kind of salary? No of course not, but UK housing benefit will come to the rescue and of course they effectively get education and healthcare for free because they are paying next to no tax on their paltry income. Eventually they pay enough NI that they can get full benefits as well, which will come in handy one people realise that Polish hand-car-wash is a luxury they can't afford.

Martin said...


Nice to see you quoting Gaetano Salvemini.

Anon 7:08

Why should the rightism of your middle-age hold more appeal for Laban than the leftism of his youth?

Anonymous said...

Off topic but somewbody might be interested. Why did we not get immigration from ex-african colonies before the last decade or so? Nigeria was a colony just like Jamaica. said...

There needs to be something to enable more people to get a mortgage, thus allowing them to buy and enable movement in the property market. And slowly this is starting to be seen again. However, banks need to be careful who they lend to and do agree with schemes are government backed then why should the lender care if the borrower defaults.....


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