"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.