Thursday 4 December 2008

Brown's Mortgage Giveaway

The media are generally in favour of this new wheeze, as are the usual suspects like Vince Cable. My gut reaction says it is a bad thing when all people such as these agree,

The for margaret beckett to say it will only help 9,000 families at best is akin to a huge backtrack; classic New Labour spin; big announcement, no follow-through.

However, once again King Gordon is helping everyone but the diligent. The idea is for the Government to gaurantee loans of up to £400k for people who lose jobs and can't make repayments.

But who says they could ever make the repayments? The law of unintended consequences looms large.

The buyer of a Northern Wreck 'Together' 125% whopper can see some nice chinks of light here. Already badly in negative equity, he now gets 2 years to live in his house. At the end he owes even more and the value of the house is lower, perhaps under 50% equity by then. So the bank forecloses and he is turfed out to bankruptcy; but he has had 2 more years of living beyond his means and the government has further subsidised the banks, lost even more money and allowed their books to be cooked further for longer. Finally, as any fule know the market cannot adjust to lower prices as the market is being artificially supported.

Which banks will sign up - well the ones Gordon already owns for sure. Sociaism is pervasive in these dark times.

No doubt people want an alternative; we had a tried and tested one, mortgage interest tax chance of that from a socialist government...a tax cut! pah!


Anonymous said...

The most likely scenario is that Bottler made this up on the fly in the HoC chamber so that 1--Attention is diverted from a)The Damian Green caper b)The Stasi "papers citizen" outrage in Queens speech--and 2--Bottler can get hisself big headlines as Mr Generous. He, of course, lied to the House about the Banks being onboard--par for the course nowadays. Once the Banks said "Wait a minute-we've never heard of this tripe" and the rest of the ZaNuLab idiots realised what trouble the Great Idiot's gob was leaving their arses in, then the damage limitation squad (ie the Caravan Queen)was unleashed to say "Pay no attention the man behind--sorry, in front of,--- the curtain.

Bill Quango MP said...

Its a good idea badly implemented. why not just insist on a restructuring of the entire loan over say 30 or even 40 years? That reduces the payment and allows the homeowner to remain in place. First charge still goes to the lender in the event of death etc.
Surely house prices will have risen a little in 30 - 40 years.

Just a back of an envelope I found in a taxi idea I know. But I didn't have room for more workings out as someone had written on the front "middle classes.. we need their votes.. use THIS mortgage relief idea.. work out details later. I'll announce it as soon as QE2 sneak out and phone NR tell them what we've done.

Raedwald said...

Tom Paine made the same point about the repossession holiday; as a young lawyer he had experience of acting for the lenders, and his advice for those who can't pay is to get out and get it over with - prolonging the process doesn't help and most of the time makes things worse.

You're right. This is no measure aimed at helping homeowners - rather it's a measure aimed at distorting the market. Until the housing market recovers, nothing else will. But actions like this that delay the market finding its level also delay the recovery. And to miss-sell it to individuals as a help when it may harm them is callous and unforgivable.

Unknown said...

The wholesale nationalisation of the retail banks in the UK is very close and, i fear, closer than many might think.

With KingGordon and little-Prince-Ally around, backed up by the Prince of Darkness himself we are truly through the looking glass.

I am honestly frightened by the levels of state intervention. A business that cannot survive the stresses and strains of procyclical business doesn't deserve to survive - if anything, Adam Smith and economic thinking calls for a Darwinian system which, prop ups by the government, the UK economy ain't.

Anonymous said...

I am dismayed by all these attempts to "help" people. In a vague way, I cringe whenever the word is used these days.

It's funny, though, that it's only very recently they've taken this action. Is it because influential, "important" middle-class people are losing their jobs?

AntiCitizenOne said...

No, it's because most Labour MPs have BtL empires and they are seriously near bankruptcy.

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