Wednesday, 15 April 2009

The new Government asset bubble

A keen eyed commenter on the previous thread has pointed out this article in the Telegraph.

All the comment in the article is that this is a positive thing to help people out, as if mortgage lending were some kind of social service rather than a straight commercial agreement.

We may feel for people stuck in negative equity, but they were all warned not to buy houses at the top of the market on unsustainable borrowing rates. Caveat Emptor.

What this is proof of is the theme I have run since last weeks scoop (I notice none of the MSM have taken it up, Guido has stolen all their focus). The Banks are being told to lend by the Government. They have targets to hit. This is one way of doing it, not only by getting more money into the market but also pleasing the socialist government by keeping the unable to pay in their homes.

The second huge issue here is that this sort of behaviour will affect property prices again. It will contribute to prices stabilising at too higher rate...if it works. If it does not then these 120% LTV's will soon be 150%+ LTV's - at that rate why would you not just had back the keys, what is the point after all.

We all need to keep a look out for how the mendacious government interference is going to affect us all and the markets they are interfering with. The law of unintended consequences is the clear here in the statue book of UK plc.

I can't wait to see what Alice thinks of it....


Elby the Beserk said...

They were quite clear, once the shit had hit the fan, that the aim was to get lending back to 2007 pre NR rates.

i.e. Do the whole thing all over again.

Come friendly bombs and rain on New Labour... as Mr. Betjeman might have written had he lasted long enough to see the desecration of his beloved England by these bastards

Anonymous said...

Noticed that other bloggers have picked up this since i posted that link, it really does defy all logic, hence this must be a no10 idea, it would nicely push a ream of reposessions/negative equity nicely into the next governments hands I never used to be this cynical. cheers Labour


not an economist said...
This comment has been removed by the author.
not an economist said...

Sorry - what are LTV's?

That notwithstanding, if house prices can be seen to be on the rise then Brown will proclaim that the green shoots are back and recovery is on its way. Unfortunately this may fool enough people to win him (or at least Labour)the next election.

I know, I know. The hole in this argument is the fact that I am attributing base, ulterior motives to the good natured Mr Brown, saviour of the world and a paragon of morale discipliine in the corrupt world of politics. Well do forgive but I am going to stick my kneck out on this one and go with what I have written above. By all means empty your bowels in my left ear if I am wrong.

Anonymous said...

It still needs to be paid back, whether it's 50%, 90% or 120% of the 'value' of the house.

Lot's of these esteemed property experts, and the goverment, seem to ignore this small point.

Mark Wadsworth said...

As I said at mine, when prices have fallen by another 20% (which they will), a 120% mortgage becomes a 150% mortgage.

I'm not sure it is physically possible to sustain the house price bubble in this way, for several years Johnny Foreigner was lending UK households £70 billion-plus a year (which has now abruptly ceased), so it needs at least £70 billion of NEW LENDING EVERY YEAR to be in with a shot.

Which equates to another 15% on income tax or doubling VAT to 35%.

Judy said...

Over here in Ireland they are taxing the shit out of the dependable PAYE and taking a pension levy from civil servants. ie. a 20% reduction in take home pay, if you are a Teacher etc.

Btw, if your are a policeman in Dublin Airport, you have a 60 euro a week lunch allowance.

Unions that made sense long ago, make no sense anymore.

It's not the Unions that are the problem, it's politicians thinking revenue from taxes grow exponentially and so short.

Sebastian Weetabix said...

MW, you're bang on with this. Money is still money and debt is still debt, whatever the snot gobbler in No10 may think. You can't just magic it up from nowhere & you can't avoid paying your debts. Sometimes I think it's a scorched earth plan to really screw things up for the Tories, but on mature consideration I suspect he is just a delusional loony cooped up in the bunker, who really believes there are another 10 divisions to throw at the Russians.

You're still wrong about land value tax though! ;)

Pogo said...

Are we not likely to get our knickers in too much of a twist over >100% LTVs? Negative equity is not really a problem if you've actually bought a house to live in rather than as an item of trade. This is assuming that a decent majority of those sliding into negative equity have been able to pay their mortgages in the past - and, subject to retaining their employment, should be able to continue so to do.

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