Housing hazards

The government was helping people to buy houses because houses were too expensive.

And now they're helping people to buy houses because houses are becoming too cheap.

And, as they didn’t stop helping between the times when houses were expensive and when they became cheap, at some point we taxpayers must have been helping people to buy houses when the price was exactly right. Hm...

There’s something fishy here. We hire the government to sort things out for us, yet they want the rest of us to fund people’s house purchases, whether houses are cheap or dear or just right - I suppose it must be our own fault for electing these twits.

As part of the same anouncement, I read that approx 200 million is on the table for the local authorities to 'take a share' in houses, of people who can then avoid foreclosure.

If we assume that £40,000 is an amount that is big enough to make a difference to someone 'struggling' with a mortgage amount (ie pay down a lump sum to reduce the monthly payments), then that allows just 5000 families to benefit.

I would imagine that many people are struggling in any one town alone..

also - this assumes that it is the increase in mortgage payments that has pushed the householders over the cliff. wheras it is just as likely to be the energy bills, food bills etc. They won't reduce!

also - the bail-out will require a legal change to the ownership deeds, (joint owners) - so the legal fees will have to be found from that pot.

This is a complete non-runner!

it was inevitable that any government announcements were going to be a complete and utter non-event. Nobody will be surprised in the slightest.

I have been a keen proponent for some time of allowing individuals to hold residential property in their SIPPs. I see no reason for the government not allowing this considering that most otehr assets can be invested in SIPPs.

This would bring longer term stability to the property market as individuals would hold their investment for teh long term rather then speculatively buying property. The government must also remember that it relies on private landlords to provide housing and this would be a way of assisting these housing providers.

Perhaps, Robert, you could ask the Chancellor or PM why he has not considered this move, considering that the government came so close to allowing individuals to hold residential property in their SIPPs 2 years a go.

How obvious it now is that GB's prudence was built on borrow and spend fuelled by monopoly money house price increases.
Now the market must find the right level for house prices
Interfering only prolongs the agony and a sharp fall off the cliff will accelerate the bottom much quicker and therefore lead to a faster recovery than a long prolonged recession as last seen in the eighties.
This also applies to the banks and in the end we will probably see a meaner leaner and fitter banking system.

Since willing purchasers of new homes, with no deposit of upto 20%available to satisfy most banks new leverage requirements, will now potentialy be able to borrow the deposit from the taxpayer [up to 30%]interest free for five years, then demand at the begining of chains in the housing market can be stimulated allowing homeowners [including negative equity ones if such can be called homeowners ]to trade up and down according to their economic situation . The added stimulus can provide a bottom to the housing slump on which a new level of solvency can allow the homeowners to spend the final remnants of their houses by borrowing from willing banks the secret money given them by the Bank of england

I can only imagine that this measure is simply about being seen to be trying to help people.

It clearly won't make a significant difference to the UK economy as a whole.

Hats off to post1, brilliance sir, sheer brilliance!

None of these changes will affect houses prices.

Effectively since the credit crunch the amount of money chasing houses has declined by about 30-35%, as banks restrict lending. Sub primers have been taken out of the market, whilst everyone else is facing higher deposits, tougher checks and lower lending multiples.

Until this reduction in demand feeds through to prices, activity levels will remain subdued, as everyone is expecting further falls.

Going on the Nationwide data of a 10% drop in prices, I would say we are only about one third of the way through this process!!

i have seen Brown , Blears and Darling trying to make this look like the answer to the nations woes and they failed miserably. They just dont understand the problems, and if they really think that a 1% stamp duty holiday will make a difference then they are even more out of touch than i thought. No, this is a typical politicians "look at us we are doing something" response. When will they realise this is a market, if they dont like what the market is doing then nationalise it. (im only joking Darling!)
Today's OECD forecast shows that Britain is the only major economy in the world which will face recession in the next six months. The warning severely undermines his claims that the UK is well-placed to withstand the global downturn. The game is up Gordon!

So having begun buying up the nation's mortgages with the Northern Rock bail-out, the Government now wants to start buying up the nation's houses! And at a time when house prices are going to fall further by double-digit percentages. Why does this remind me of the opposite, yet equally misguided, scenario, when Gordon sold off half of our gold when the price was less than $300/oz in 1999, and has seen it rally 200% since then?

ramp up prices for a decade, then buy 'em up when prices fall.

NuLabour really are capitalist to the core are they not?

The main thing to remember is that this failed before. Yet another thing for Labour to blame David Cameron for...

Post 1 has hit the nail on the head ,we are governed by a parlamentable twitoccracy ,how could we the lemmings have ever believed things could only get better without ultimately getting worse.

Dearly beloved we are gathered together at the top of the cliff, for the purpose of government martyrmoney ,let any who believe otherwise sidestep now or forever hold onto their declining assets

This tinkering with the housing market will make no difference as will soon be obvious, and if there are any benefits it will be in the job creation of administrators for yet another nonsense scheme from Gordon Brown.

Politicians like to be seen to do something.

Post No6:

You are indeed right. It's doing something because this terrified fearful government feels that it needs to be seen to be doing something, anything.

Of course it's not going to matter one little bit, you can't play with millions in a market of trillions and hope that it'll make a difference. House prices will fall becuase they have become unaffordable and money is unborrowable.

It's only when we get back to house prices being 3-4 times average earnings, rather than 7-8 times average earnings that it will stablise.

I hope this is the full of extent of their bailout. Post 1 pretty much sums up the idiocy of the govermnent.

In addtion I ask, why do we think our economy is tied to house prices?

Germany does OK without house price bubbles. Why? Because it has top class skills and products to sell in the international marketplace.

What do we have? Highly vocal estate agents, surveyors and untrustworthy banks who want the recent party to keep going.

It's amazing that they think they deserve a bailout where engineering and services companies don't ask for anything. Their behaviour is akin to that of spoilt teenagers.

These vested interests have duped the normal people of Britain into paying ridiculous amounts for their homes at the expense of massive debt. They have made people reliant on this "wealth" and created a massive rift between the haves and have nots. It wouldn't surprise me if these people are responsible in part for the "broken society".

If houses were only bought as homes and effective mechanisms were in place to ensure that lending was carried out in an appropriate manner, then maybe stepping in to help the housing market would be acceptable.

HOWEVER…

- It seems that homes are ‘investments’.
- Their price increases were decoupled from the measure of inflation.
- They were allowed (if not encouraged) to rise so that the British debt based eCONomy would prosper.
- The Stamp Duty and Inheritance Tax was squandered.
- The population was led to believe that they were wealthy because their house (investment) was rising in value.
- The house driven wealth was used to underpin a service-based economy that would have otherwise failed years ago.

So why is it, and how can it, be acceptable to step in and interfere with what should be the natural market lifecycle?

Oh that will be because the truth of the situation is too putrid for everyone but the truly prudent to bare. The nation is broken, it doesn't know how to save, waiting to buy something until you can afford it is so yesterday.

If you didn’t buy into the housing market because you thought that the situation is ludicrous and unsustainable then you too (like me) are a fool. As it seems that the government has an agenda to ensure that property prices will always go up.

Are Brown and Darling mad? It seems to me that they must be.

Lending 30% of the cost of a house on interest free terms means that these people will need to remortgage in 5 years time when they will have to borrow at market rates. Will there earnings have gone up sufficient to pay this additional interest? No, of course it won't.

This echoes exactly what happened in the sub-prime market in the US and is simply storing up problems for 5 years time.

Madness!

GB and AD are tinkering. Probably with no result - that would be the best outcome. If any of this package works and slows the decline in house prices it will be a failure for the country and a very costly one at that.

Interest rates must be high enough to provide a real positive value fro capital and investors. In the past decade or so money has become more and more worthless and thus many highly creative fictions (Synthetic Financial Instruments et al) have been used by the banks to create more money so that the smaller returns gave them a good(!) profit.

I an quite concerned that the Treasury will put / is putting pressure on the Bank of England to lower interest rates this week- this is insanity. I do not understand how any central banker can retain any credibility if he/she agrees to such a move. The pound is dropping putting up prices and inflation and if the rational given for interest rate policy is not a complete fiction interest rates MUST go UP to bear down on inflation. If they put rates down they should be doing stand up comedy not working as a banker.

One final point: if HMG gives a home buyer a 30% discount on a house it is the same as a direct devaluation of all of the savings of every one of the British people! HMG is confiscating 30% of your money- savers!

Who gets the 30% interest free loan, which is in effect a tax free gift of about 10% of the value of your home over a five year period?

If you are in arrears then who is going to pay those off? the government?. What are the criteria for being a deserving case?

Like 'key workers' one suspects it is going to be an arbitrary decision on who is chosen, and probably for political reasons. With only 5000 lucky winners of this wondrous bounty I rather think it would have been more fun just to put every taxpayers name into a hat and had a draw. It would have the same amount of impact on the property market.

Post 12 hits the nail on the head when he talks about a 'twitocracy'

Do you think the banks have fully declared all their loses from the credit crunch? More importantly do the global investors? Underwriting the banks could prove to be worst than not doing so.

Now would the underwriting of the mortgage market be any different from Fanny and Freddie? Is there not more risk to this than upside?

Not only should the Government proceed with this plan ...they should greatly enlarge the scope by simply buying houses at prices at early 2007 levels and giving them to selected people.

This would help some people and also "kick start" the Housing market.

This could be paid for by printing more £20 and £50 notes until we have enough to hand to owners---for the homes we give to the lucky people.

We wouldn't have to worry about anything then.

Any spare £20 and £50 pounds left over after solving the housing crisis, could be collected together (and a few more printed if necessary) to be used to buy a football club like Abu Dhabi have just done....

Although, our British ones being too expensive at present , maybe Inter Milan or Barcelona would be more value for money for HM government.

If I can think of any more brilliant things to do to help everyone using magic money, I'll post again...but for now I think it's time for my medication.........

If there is anything the government can do to convince me they have plan, it would be doing NOTHING about the housing market. The stupidity bubble bursts and that is the best thing that has happened it the UK for decades, economically speaking.

The Blair-Brown years...what a disaster.
Its too late now.
The time for action and control in the property market was years ago.

pesto wrote
"2) that it will help beleaguered housebuilders rebuild their profit margins, since some will simply increase their selling prices by 1%;"

Your another BBC reporter in the pocket of the conservative party if I remember rightly. Why would they do such a thing if they are having trouble selling properties? I thought they couldn't sell properties because nobody can get a mortgage? So we now have two political blogs worthy of Conservative Home.

#1 Comment - perfect summary

#3 Comment - great idea - but remember you are talking to the Government that has stolen £5bn a year since 1997 in tax credits for pension funds and then further reduced the benefits to prudent savers for their infirmity by not allowing them to use their SIPPS for personal house investments because the SIPP holders get richer - not a reward for prudence. 2 years ago, the Government worried about SIPP use for holiday homes and closed the tax loophole. Loopholes can be re-opened.

#17 Comment - Spot on. The thought of another short term Goverment Loan, interest free for 5 years that becomes "on demand" for repayment at maturity, and needs refinancing at that point, plus paying interest to the Government of course, is nuts in a shrinking economy. Look at GDP Money growth's slowdown in recent months. People are not stupid. They are belt tightening, unlike our elected representatives, who all appear to live in "never never land" at Westminster.

I do think #3's point about a SIPP is a good one. I would make a simple suggestion to add value to it, then ask Robert to put this to the Treasury and to the Opposition Parties.

Why not allow SIPP holders the opportunity to buy residential property through their SIPPS but only on the strict provision that the home is rented to a direct family member (son or daughter). It is difficult enough for young people to make a life of their own saddled with student debt, low wages, in a tough economic climate.

SIPPS are long term investments, and the siblings can pay an economic rent to the SIPP owned by their parents. Result is that parents charge rent to their children making an income based return to add to the SIPP whilst allowing their children the chance to live indepdently, and once the SIPP holder reaches tha age of 75, he/she allows the son or daughter first option to buy the property at no lower than 115% of the purchase price or fair market value whichever is the lower. Simple. This is a more effective form of tax redistribution, which stimulates the housing and pension markets simultaneously.

Someone else can come up with an idea about buying or reutilising 885,000 empty homes for the benefit of local communities across the country.

Why can't we just have the real Mr Bean make the policies?
His would have the same effect and
at least we can then writhe in frustration and chuckle out loud instead of smirking and smoldering in turn at the incompetence and impotence of these people who are masquerading as a government.
As the man said, do they take us all for fools?
John C.

Perhaps, Robert, you could ask the Chancellor or PM why he has not considered this move, considering that the government came so close to allowing individuals to hold residential property in their SIPPs 2 years a go.

I like to think it was me rubbing my hands with glee at such an idea on another financial website that put him off.

If the middle classes can afford to buy property at effectively 40% discount then that is exactly what they'll do. In spades. That's what I would have done. Until I'd used up the entire SIPP allowance. Meanwhile how much tax would Gordon Brown have received if I was borrowing money on my house to live on but socking my entire salary into my SIPP. Not a penny.

That's why BTL ain't in SIPPs. Because he'd have had a black hole two years ago instead of today.

Hope that helps.

This will only help the large property developers, no-one else. It will keep the new and under construction houses at the price they originally thaought they would get for them, at the tax payers expense.

Has anyone else also noticed that this money is coming from UK taxes, but will only be available in England? The SNP will have a field day with that.

Any bets when the final tweaking of the figures takes place that the vast amount of it ends up spent in the major urban conhurbations of northern England? Funnily enough, the same areas where Labour's core vote is disintegrating.

Here's a good link (apologies to Aunty Beeb - it's from Sky News)

https://www.youtube.com/watch?v=DvqNQG1G_Yc

"will now potentialy be able to borrow the deposit from the taxpayer [up to 30%]interest free for five years"

In other words

They expect the house prices to fall by 30% at maximum.So they want the banks to encourage lending again at that suicidal rates.

More than most other nationalities, the British are completely wedded to hearth, home and home-ownership. When the housing market falters, apart from damaging every property owner's financial confidence, that huge slab of the economy relating to housing - house building, moving, decor, services etc - inevitably falters with it. A broad spectrum of jobs and commodoties are affected and recession can hardily be avoided. This is exactly what happened in the late 80's when the then-government reduced a couple's double tax allowance on a mortgage to a single one. A rush to beat the deadline resulted in a buying surge, followed by a too swift decline and the entrance of Mr Major's dreaded 'R' word! How often does history have to repeat itself? The Government needs to get the property market moving again and asap, before the bursting bubble - wished for (perhaps unwisely) by so many - turns into an unexpected disaster for all.

I work as a Mortgage consultant, based in an estate agency, and I have had only 1 client ask me whether they should hold off purchasing because of a stamp duty freeze or holiday since the first initial comments were made a month ago.
This makes it blatantly obviuous that there is a much wider issue causing the slowdown, and it is blatantly obvious to me it is the banks reluctance to lend. Figures published showing sub prime borrowing dropped from 32000 July 07 to 2000 July 08 and the 71 % drop in mortgages July 07 - 08 clearly says to me our economy is in trouble.
Does the government really believe that this drop in the last year was based on people suddenly deciding that they did not fancy paying stamp duty, so would not move. Time for them to get their heads out of the sand I think.

Does the government really believe that this drop in the last year was based on people suddenly deciding that they did not fancy paying stamp duty, so would not move.

Of course they don't. But the Tories have appointed Kirstie Allsop as their 'Housing Tsar'. And the same beautiful mind that assured you that 'renting is dead money' is convinced that people refuse to move for 1% of the value of their property. And if she says it then a sizeable proportion of the great British electorate will believe her. They'd believe it if Jade Goody said it.

So something must be done to counteract this clarion call. And this is what we have. A relatively low-cost (by this governments standards) 'fix' that will fix nothing. But come election time or indeed any time Gordon Brown and his apologists will be able to go on (and on and on...) about the 'package of measures we have introduced...blah blah... hundreds of millions of extra funding...blah blah...'

Does the government really believe that this drop in the last year was based on people suddenly deciding that they did not fancy paying stamp duty, so would not move.

Of course they don't. But the Tories have appointed Kirstie Allsop as their 'Housing Tsar'. And the same beautiful mind that assured you that 'renting is dead money' is convinced that people refuse to move for 1% of the value of their property. And if she says it then a sizeable proportion of the great British electorate will believe her. They'd believe it if Jade Goody said it.

So something must be done to counteract this clarion call. And this is what we have. A relatively low-cost (by this governments standards) 'fix' that will fix nothing. But come election time or indeed any time Gordon Brown and his apologists will be able to go on (and on and on...) about the 'package of measures we have introduced...blah blah... hundreds of millions of extra funding...blah blah...'

All it will do is accelerate the house price fall (no bad thing) as folk hoping to get 200,000 are pulled under 175,000. And now they're 25,000 shorter than they'd planned they'll have 25,000 less to spend on their next house etc etc.

Poor old Gordon Brown. Now he knows how John Major felt in 1995. Good. Nobody deserves it more. Except possibly Tony Blair.

Everyone blames the credit crunch but perhaps banks/building societies would lend if there was certainty on house prices .Would you lend 95% of current value when most anticipate the value will be less in 6 months time.Given that most first time buyers have not got 25000 pounds for a deposit it is surely no surprise the market has slowed.

Britain's housing market is one big pyramid scheme, where a new crop of suckers is always needed in order to make those higher up the pyramid richer.

The government is committed to the sleight of hand of visibly tackling product price inflation to curb expected inflation and hence wage inflation, whist at the same time actively encouraging asset inflation.

The nation felt richer, the economy looked in good shape, but in reality we were all simply becoming more indebted as wealth transferred from the young to the old. As the wool is lifted from our eyes, we see stupid interventions such as these, intended to prolong the boom.

Unfortunately the Conservatives are no different, and have nailed their colours firmly to the mast, by advocating similar policies designed to re-inflate the housing market - and associating themselves with that ghastly plump female television presenter who has no qualms about tricking the next rung of the pyramid into a life of debt and poverty.

" I work as a Mortgage consultant, based in an estate agency"
MarkBoy69 - at least then you should be pleased at the Government announcements that they are changing the benefit rules for paying mortgage interest of those people who lose their jobs, so that you will get some relief after 13 weeks instead of the current 39?
A clear indication that Darling knows his other changes will make no difference to mortgage arrears problems, but still a useful backup for the tens of thousands of people who will lose their jobs over the next year in the mortgage, estate agency, home retail, building and allied industries.

Unfortunately the Conservatives are no different, and have nailed their colours firmly to the mast, by advocating similar policies designed to re-inflate the housing market - and associating themselves with that ghastly plump female television presenter who has no qualms about tricking the next rung of the pyramid into a life of debt and poverty.

Either that or the Tories have done a good job of frightening Gordon Brown into taking steps to 'tricking the next rung of the pyramid into a life of debt and poverty'.

Labour are so bereft of ideas now that the only thing that maintained the illusion of 'no more boom and bust' has gone bust they're ripe for suggestion from anywhere. They're so utterly panicked they're making up policy on the fly without thinking through the consequences.

We should just be very grateful that Gordon Brown hasn't just decided to nationalise everything and print more money. I'm sure that's what the instincts of most of his party (and probably himself) are at this point.

I do worry about the Conservatives too though. To most people on these blogs it is apparent that the problem is excessive government and private debt built up over the years on runaway house-prices. But I have this awful feeling that the reason the voters are restless is not the parlous state of the nations finances. They're concerned by the fact that their house is going down in value and they can't borrow more money themselves. Like they did last year for the new car and the holiday in the Seychelles.

Both parties have to be careful about alienating this much larger second bunch of people. They're the 'swing' voters. Which is why even the Tories aren't blaming individuals for over-stretching themselves and paying too much for ludicrously over-priced houses. People won't thank them for pointing out that a large part of their financial pain is their own fault.

Hence the complicity in 'getting the mortgage market moving again', 'helping hard-working families', helping people to own their own homes'.

What Labour and Tories should be doing is rejoicing about the fact that houses are getting cheaper. Hurray! They'll be easier to afford. You'll have a stack more disposable income every year without having to borrow against your mortgage to enjoy it now. Overall, low house prices will make you better off.

#8 As Robert pointed out it has dropped by 71% and not 30-35% as your blog suggests. By that I do not mean house prices will therefore fall by double the amount you suggested. I think it ultimately comes down to affordability. And unfortunately markets do not follow rationality and history proves this time and again every time a bubble bursts.

What is really bizarre is no one has come out and acknowledged that what we are experiencing now is 'Normality'. The LTV of 70-75%, the 3.5 maximum multiples of income, etc.

In the last few 'irrational exuberance' years the conditions were abnormal. We keep hearing there is a mortgage drought but I'm sorry there are plenty of mortgages out there provided you meet the now quickly changing 'back to normal' criteria mentioned above.

Another point that is really scary is the amount of personal debt that people are struggling with. The BBC reported a couple of days back that an average household now owes 23,500 pounds excluding mortgages. Now even assuming about a third of the people have no outstanding debt that average figure rockets in excess of 30 grand. The time it will take for people to pay back that debt, at a time when the 'bare necessities of life' inflation index is close to 10% is anyone's guess.

The government is no better they are scratching the bottom of the pot and I checked on the latest 'Economist' (last couple of pages) the other day; it has one of the worst reserves, current account deficit, trade deficit, etc of the developed world. And we keep hearing UK PLC is best placed to weather this storm. I for one think we are sheltering behind a hut made out of straw with a force 10 hurricane approaching. I'm an optimist though I just hope it passes off quickly and we can pick up the pieces and rebuild.
However sometimes I think we don't trust a quack to operate on us for obvious reasons. Why do we think a bunch of imbeciles can save us from this coming storm is beyond me? I agree with #1, never again elect these bunch of twits who have only run trade unions and never run a plc.

Those advocating the introduction of residential property into SIPPs are either blind or indifferent to the problems facing those in their late-twenties or early thirties today. Even in the rising market, the young were forced to take on ludicrous debt (in addition to the student debt that baby boomers never had to face) in order to compete with the middle classes who had more equity and thus found it easier to obtain cheaper financing in order that they own a string of BTL properties. Are the SIPPs fans seriously saying that those of us not on the property ladder should compete against people who can get a 40% discount on financing costs?

The government has already watched over one the largest inter-generational transfers of wealth ever and is in serious danger of leaving us with a property-owning class and a renting class (based on age, not levels of hard work or education). Inclusion of residential property into SIPPs would make this much, much worse.

It is my firm belief that the financial system has hit one of those 'reset' moments. It is pointless to blame Gordon Brown or Alistair Darling for something that is an inevitable outcome of the system. Perhaps some far-sightedness on Brown's part might have mitigated things but it would not mean that Britons would be drinking champagne in ever more expensive houses will Europe and America headed for mass unemployment (and China) on a scale not seen for, I think the phrase would be, '60 years' (though that actually means 80, if we're being honest: Alistair Darling probably didn't want to be too obvious). Banks will continue to repair balance sheets and restrict loans because, and I want to say this clearly, WE ARE IN A RE-INFORCING DEBT CYCLE NOW. This means that what were good debts will go bad and this will knock onto other 'good debts' causing further and further restriction, until all that money we borrowed from the future is paid back - with interest! Or of course the banks could declare their debts become insolvent and we'd have collapse then panic.
But this is not going to be 2 hard years then coming-up for air.

Of course the real problem is that Consumers Salaries are being reduced relative to inflation.

Inflation at eight percent , average pay rises at four percent equals a fall in House prices.

Of course freezing Public sector pay except for MP's at two percent helps to make the artificial situation even worse.

This whole crisis seems deliberate, from the Short selling stock borrowing hedge funds (robbing our Pensioners) thro to a Government taking suicidal policy decisions.

Perhaps there is an illuminati after all, and they want us all dancing like puppets.

The Conservatives will be no better than their real masters!

The solution to the housing problem is simple: more immigrants.

This could readily be justified using Labour's brilliant devious argument that we are an ageing population and require new blood to pay taxes to fund our pensions. Why not our houses too?

Our economic genius, Gordon Brown, could make a start by offering to save the Georgians from LilliPutin by simply transplanting their whole population over here. He could then prance the world stage as a hero offering to empty any ex-Soviet country the incredibly toned, muscular and gun toting bully invades. Russia could be great again and our house prices would rise. Seems win win to me.

This is another ridiculous measure by an increasingly desperate government. It never ceases to amaze me how stupid politicians are in believing that they can control market forces.

Remarkable as it now seems, Brown was able to hoodwink the masses for over a decade into believing that he was King Canute, i.e. able to buck the economic tide. The irony, of course, is that his inept policies have led us to the biggest economic crash in living memory.

Indeed, the coming depression will unravel another prevalent myth, i.e. that there is a shortage of properties. There isn't and never has been. There was only a shortage of properties to buy because of Buy2Let. But, in the months ahead, the market will be flooded with properties when many such owners are forced to sell.

Unfortunately, for many this will mean bankruptcy and millions will be left homeless.

Welcome to Bankrupt Britain PLC - anyone interested in buying? PS Stamp Duty concessions available - Inquiries to A Darling

Robert's last few questions are spot on the mark. I'm 25, with a decent salary and living just far enough outside the south-east that I would not be far off being able to afford a house for the first time if I saved a little more towards a deposit. But I'm not even thinking about it - I'm renting, and plan to continue to do so until things have settled down a lot more. By doing so, I will certainly pay rent money into the ether and I may miss an opportune buy at what will later turn out to have been the lowest ebb of the market - but I'm okay with that sort of risk. The risk of negative equity makes me a whole lot more wary, and nothing that the government has done (or indeed, probably can do) to tempt me towards buying a house in a falling market has had the least effect.

Robert, you appear to be making a simple story more and more complex.

1. The Government do not have a clue.
2. There is a shortage of mortgage finance, hence interest rates on mortgages have risen.
3. Because demand for houses has dropped, prices are dropping, and building has stopped.
4. If you want to fix problem, you need to make money available.
5. You also need to stop quoting 'marginal' figures. My bank still provides the same proportions of mortgage finance that they did several years ago.

Now why would a highly intelligent set of MP's and Ministers undertake policies that any Taxi Driver could tell would be unpopular and election losing ?

Because they have been told to lose the next Election !

The Gods forfend that any Party have a fourth term.

It is interesting how many people are envious of House owners.

But sadly for them the vast majority of Houseowners buy a House to live in.

Once they own one, they live in it, and don't particularly worry about what it is worth.

BBC scaremongering won't change that.

The people I feel sorry for are those who have to move with a change of job, but then they can always rent out their old House and rent somewhere new until the staged crisis is at an end.

You wait when the Powers that be want another Boom , it'll be there, just hold on until then!

I think this article posted on Yahoo confirms my initial scepticism on the proposals...

https://uk.biz.yahoo.com/01092008/404/housing-rescue-doomed-fail.html

I think it is clear that the government does not have a mandate that is in the best interests of the people. This stamp duty "holiday" farce is merely a continuation of political theatre. We need to look at how much we value what a politician says, especially when his words are getting contradicted every month or so.

House pricess have risen by well over 200 percent during the last ten years and now fallen by about 10 percent over the last ten months.

If the taxpayer is to subsidise the housing market during periods of decline , then it is only fair that when prices are rising then the taxpayer should be able recoup its money by taxing the profits made.

Re #51

They do via:

Stamp Duty,
Inheritance Tax,
and VAT on housing driven wealth and spending.

(see #16).

Thats one of the reasons why the Government don't want to see prices fall.

It amazes me that the Government is prepared to spend Billions of pounds to protect citizens of foreign countries (via occupation forces) and yet is not prepared to fund proper pay rises for the UK Public Sector.

But then perhaps services for the British Public are not important to them.

Likewise, they have spent Billions of pounds Nationalizing a UK Bank, which whilst very necessary, makes the paltry savings from demoralizing and damaging Public Services look rather pointless.

Come on Mr Brown stop saving the pennies to squander the Pounds !

Britain has always been a homeowner-based economy - not like the economies of France and Germany, where the majority of people live in rented accommodation. Homeownership made Britain one of the wealthiest and stable economies in the world.

Scarcity of building land, difficulty in getting planning permission and the time it takes to build substantial property using bricks and mortar and with every increasing costs, it all adds up to a very valuable asset that increases in value. These assets are the foundation of the British economy and credit ratings upon which stability depends. Because of this, the majority of people want to get on the property ladder.

The bankers’ also knew the enormous value of these secure assets, and that they would be the driving force behind a powerful booming economy. These assets were so valuable, that other loan sharks wanted to get in on the act - adverts started to appeared on national television encouraging homeowners’ to free up equity from their home and to - Spend! Spend! Spend! The banks’ were promoting credit cards – shopping on the high street was a wash with cash.

Margaret Thatcher allowed rented houses to be bought by those living in them. Her policy gave to people the opportunity to get on the property ladder, it was the foundation of the booming economy.

The bankers knew they would make a fortune if they could trade them on the US financial markets in the same way as US government-sponsored enterprises, or GSEs, and incidentally (in 1968 the US Government under the Johnston administration used these GSEs to finance the Vietnam War. Governments do not create a war tax, otherwise they would have to account for the expenditure – but if it is financed from other taxes, the accountability and transparency for the costs of war simply does not arise). However, the bankers’ knew mortgages were sacrosanct and couldn't be traded unless they were taken out of their protective regulation. So how did they get their hands on them?

Well, first, you must know what you are doing, and know how to have them deregulated “to get round existing strict regulation and the law”.

Gordon Brown to cover his tail is now saying it all started in USA, blaming Americans’ for causing the credit crunch crisis.

Don’t let Mr Brown spin you the yarn that it all started in America with the subprime market. The bubble ended in America, when it finally burst. The credit crunch that we are now experiencing in Britain started with deregulation of our own banking system. When Mr Brown changed the banking system in 1997, this allowed unscrupulous bankers’ to take mortgage-backed-securities out of the protection and control of British regulation and jurisdiction and to gamble with them through “institutions, which are not banks”, selling them on in the form of Collateral Loan Obligations (CLO’s) and similar products, using them as collateral in unregulated volatile markets and they lost them causing the credit crunch crisis. The Bankers’ made 26% on these transactions and were awarded over £1million bonuses, with no risk to themselves but at the risk of homeowners’ losing their homes and the taxpayer having to pick up the tab for bank loses.

And guess what! – when the banks’ started to fail, government bonds, which are taxpayers money with a triple ‘AAA’ rating, were given in exchange for collateral that were beaten dockets. In other words, homeowners and the taxpayer pick up the tab, inter alia. Cunning and Clever isn’t it? – It didn’t have to happen – it was all avoidable.

The question one should keep in mind is, was it Mr Brown's idea, or the Bankers' idea, or both? Who persuaded who?

Mr Brown is to borrow 40billion pounds ( from the same bankers’ who caused and benefited from the credit crunch ) supposedly to kick-start the housing market by re-packaging it as a mortgage-loan to those facing repossession of their homes – but isn’t this another form of a sale-and-rent-back scheme, or should I say rip-you-off-repossess-and-rent-back scam scheme? Is the strategy behind the credit crunch, to rip you off, cause negative equity, forcing you to sell to the predatory bankers, who ripped you off in the first place, at repossess prices and then introduce a rent-back scheme.

It would seem that the result of the induced credit crunch is to bringing us in line with the rest of Europe where the majority of people live in rented accommodation. Is it Mr Brown’s communist policy to undo Margaret Thatchers policy of home ownership. Is having to pay your mortgage to the Government another one of Mr Brown’s stealth taxes?

Den.
Belfast.

Rip you off, cause negative equity, forcing you to sell to the predatory bankers at repossess prices and then introduce a rent-back scheme.

Britain has always been a homeowner-based economy - not like the economies of France and Germany, where the majority of people live in rented accommodation. Homeownership made Britain one of the wealthiest and stable economies in the world.

Scarcity of building land, difficulty in getting planning permission and the time it takes to build substantial property using bricks and mortar and with every increasing costs, it all adds up to a very valuable asset that increases in value. These assets are the foundation of the British economy and credit ratings upon which stability depends. Because of this, the majority of people want to get on the property ladder.

The bankers’ also knew the enormous value of these secure assets, and that they would be the driving force behind a powerful booming economy. These assets were so valuable, that other loan sharks wanted to get in on the act - adverts started to appeared on national television encouraging homeowners’ to free up equity from their home and to - Spend! Spend! Spend! The banks’ were promoting credit cards – shopping on the high street was a wash with cash.

Margaret Thatcher allowed rented houses to be bought by those living in them. Her policy gave to people the opportunity to get on the property ladder, it was the foundation of the booming economy.

The bankers knew they would make a fortune if they could trade them on the US financial markets in the same way as US government-sponsored enterprises, or GSEs, and incidentally (in 1968 the US Government under the Johnston administration used these GSEs to finance the Vietnam War. Governments do not create a war tax, otherwise they would have to account for the expenditure – but if it is financed from other taxes, the accountability and transparency for the costs of war simply does not arise). However, the bankers’ knew mortgages were sacrosanct and couldn't be traded unless they were taken out of their protective regulation. So how did they get their hands on them?

Well, first, you must know what you are doing, and know how to have them deregulated “to get round existing strict regulation and the law”.

Gordon Brown to cover his tail is now saying it all started in USA, blaming Americans’ for causing the credit crunch crisis.

Don’t let Mr Brown spin you the yarn that it all started in America with the subprime market. The bubble ended in America, when it finally burst. The credit crunch that we are now experiencing in Britain started with deregulation of our own banking system. When Mr Brown changed the banking system in 1997, this allowed unscrupulous bankers’ to take mortgage-backed-securities out of the protection and control of British regulation and jurisdiction and to gamble with them through “institutions, which are not banks”, selling them on in the form of Collateral Loan Obligations (CLO’s) and similar products, using them as collateral in unregulated volatile markets and they lost them causing the credit crunch crisis. The Bankers’ made 26% on these transactions and were awarded over £1million bonuses, with no risk to themselves but at the risk of homeowners’ losing their homes and the taxpayer having to pick up the tab for bank loses.

And guess what! – when the banks’ started to fail, government bonds, which are taxpayers money with a triple ‘AAA’ rating, were given in exchange for collateral that were beaten dockets. In other words, homeowners and the taxpayer pick up the tab, inter alia. Cunning and Clever isn’t it? – It didn’t have to happen – it was all avoidable.

The question one should keep in mind is, was it Mr Brown's idea, or the Bankers' idea, or both? Who persuaded who?

Mr Brown is to borrow 40billion pounds ( from the same bankers’ who caused and benefited from the credit crunch ) supposedly to kick-start the housing market by re-packaging it as a mortgage-loan to those facing repossession of their homes – but isn’t this another form of a sale-and-rent-back scheme, or should I say rip-you-off-repossess-and-rent-back scam scheme? Is the strategy behind the credit crunch, to rip you off, cause negative equity, forcing you to sell to the predatory bankers, who ripped you off in the first place, at repossess prices and then introduce a rent-back scheme.

It would seem that the result of the induced credit crunch is to bringing us in line with the rest of Europe where the majority of people live in rented accommodation. Is it Mr Brown’s communist policy to undo Margaret Thatchers policy of home ownership. Is having to pay your mortgage to the Government another one of Mr Brown’s stealth taxes?

Den.
Belfast.

A cut in Interest Rates and Inflation matching pay rises for the Public Sector are what the British Economy needs.

Come on Billions for War and Nationalisation how's about a couple of Hundred Million to maintain Public Services ?

Don't pinch the pennies to squander the Pounds !

It is high time that the irrational house price rises of the last decade were stopped and went into reverse.

I am a house owner and as I have no intention of selling, then a price rise or a drop has no effect on me whatever. However, as I have children I would like for them to be able to find affordable housing, not be priced out the market by speculators.

Lets face it, the high prices could never be sustained, it was due to lending by banks and financial establishments that was ridiculous. How on earth could someone afford to pay back a mortgage that was over 7 times their annual salary if the interest rates went up even a half a point?

the best way to get stability in the housing market is to legally enforce a cap on mortgage amounts to say 3 time the annual salary. This would bring prices back into the reach of many people over time, reduce prices to a stable level and would leave more money to be spent on other things which would only help the economy.

One can only agree that the temporary relief from stamp duty is no more than a cosmetic gesture, by the government, to placate the siren voices calling for government action to help stimulate the stagnent housing market. This will do nothing to alleviate the fears tha existing and potential homeowners have about the ongoing drop in house prices and will do nothing to encourage the banks to lend additional money for mortgage purposes. That will only happen when house prices stabilize and the full extent of the credit crunch becomes much clearer.

As everyone knows and keeps saying,over the past decade average house prices in the UK have risen much faster than average earnings and housing stock is still grossly over valued. Possibly by 40% or more in some areas. Everyone including the government, the banks and the public at large knows this and until a better historical correlation takes place (between house price and earnings) then this problem will prevail and the housing market will remain in the doldrums.

The size and nature of this problem is outside the governments remit and completely beyond the governments
resources. Until the correction is more or less complete the banks, who are rightly being blamed and disvredited for causing the problem, will continue with their poicy of not lending money to anyone who appears to be less than credit worthy.

In the meantime many people who, in recent years, decided to jump onto the runaway property bandwaggon in the expectation of making a quick financial killing can now expect to get their fingers burned. Likwise those people who perhaps used the increasing value of their properties to fund a lifestyle that was in essence beyond their means might also find their fingers are now burning.

Althought the economic outlook is now looking very bleak things will get better once the full extent of the credit crunch is known and house prices reach an acceptable level and the negative equity problem will slowly diminsh. When that happens the negative equity problem should not have a long lasting effect on the majority of homeowners who behaved sensibly when taking out a mortgage.

> the best way to get stability in the
> housing market is to legally enforce a
> cap on mortgage amounts to say 3 time
> the annual salary.

I'm afraid I disagree. The best way to have
stability in the housing market would have
been to include house price moves in the
inflation rate calculation used to set the
base rate.

If house price moves had been
included as a component of inflation, the
MPC would have raised rates to stem the
inflation _before_ the bubble became huge
and we would now be enjoying price
stability.

By not subjecting such a gigantic
component to any control, the government
lost control of the economy. And
consequently they have lost the approval of
their masters – the taxpaying voters.

This move is completely ridiculous. Rather than stopping stamp duty for everyone for a year, they have simply moved the problem along to other people. I own a property of an aproximate value of
£180-185000 what this has done is effectively capped the price of my property at £175000. due to the fact that no one is going to be prepared to pay the extra, because of the stamp duty! This is yet another poorly thought out scheme by the government!

Has anyone looked into the HOMEBUY DIRECT scheme ... at best only 10,000 people can apply - costing £300m... See Here...> https://www.communities.gov.uk/housing/buyingselling/ownershipschemes/homebuy/HomeBuyDirect/

Yeah - this will really help our multi billion pound housing market !!! But, Who is really going to buy a house at this point in time?

A lot of people focus on the reduction in the supply of credit as to the reason why home prices are falling. Another side to this is the recuction in demand. The willingness of people to bid such high prices up for houses until a year ago surely reflected over-optimistic expectations regarding future price movements. Remove the speculative element and it is likely that people will be willing commit a much smaller proportion of their income towards servicing mortgage interest payments (i.e. something back in line with historical norm).

Even if the provision of credit provision got back to normal tomorrow, house prices would continue to move down to levels consistent with long-term valuation norms.

This is a very healthy correction to an asset class (UK housing) that has bubbled way higher than it should have done over the last decade or so ... it should be allowed to run its course without Gordon faffing around in there.

Well I'd say that PART of the problem goes back to the construction of the CPI index and the remit of the BoE.

In an attempt to provide a european harmonised index (and make inflation figures look good)..(maybe no-one else in the Euro-zone lives in a house ???) - anway housing is excluded from the figures...

....because it doesn't appear in the inflation figures the BoE don't have to consider so heavily the impact of growing house prices on inflation - and the perception of wealth increase due to rising house prices bouys the feel-good factor and in turn the consumer economy boosting GDP.....

....so it's not been in government intrests to keep a reign on house price inflation so that it remains affordable, in fact quite the reverse....

So I say once this housing down cycle is complete - put housing costs back in the CPI (but not now because it will artifically decrease the inflation figures).

This MIGHT encourage the government to keep a reign on house prices and keep them affordable instead of a huge boom / bust cycle.

The German housing market seems to have managed to avoid huge boom bust cycles....

Oh - and why are lenders asking for large deposits ? - Because they expect the value of the asset to fall and don't want to have further liabilities on their balance sheet - so the cure for falling prices is ---> falling prices. Stop interfering in the market, let prices fall hard and fast - then once it's truely affordable again first time buyers will be back - and the 15-20% deposit they are being asked for will be affordable because the overall amount is reduced.....

I do not own my own property yet ... I am a prudent saver of my money and do not spend beyond my cash means.

Yet I appear to be targeted by a moronic Government to prop up those who should never have purchased property, nor should they be allowed credit. They are IRRESPONSIBLE.

This country is a farce, where private companies can dictate the wealth of the populus and get off scott free when they screw up, people with no income get support when they have created their own issues - and this support comes from over taxing the silent majority who behave themselves and are now finding it hard to live with the tax burden.

The government should do nothing.

In time, the banks will restore their balance sheets and begin to lend money. In the interim houses will become cheaper and a whole generation of young people who have previously been excluded from home ownership will then find them more affordable.

This is just an old fashioned reduction in the money supply so that the bankers' golden egg laying goose of a private debt-based money system can continue to drain the people of wealth through interest and taxation.
We all have to suffer a bit so that the rich international bankers can continue to prosper but the poor suffer the most.
Milton Friedman said about the private central bank of America,
"The Federal Reserve definitely caused the Great Depression by contracting the amount of currency in circulation by one third from 1929 to 1933."

This was recently acknowledged by Ben Bernanke.

MF also said,
"I know of no severe depression, in any country or any time, that was not accompanied by a sharp decline in the stock of money and equally of any sharp decline in the stock of money that was not accompanied by a severe depression."

Re:#67 Thomas...

On Money Supply...

Was not money supply dramatically expanded by the construction by the commercial banks of the Synthetic Financial Instruments? The ratings companies gave these AAA ratings which was wrong and now that their relative worthlessness has been revealed the money that was created by these instruments has vanished. (Or rather some of it has, as some has also caused the speculative bubble in oil and other commodities.)

If the structure of the reduction in money that I have outlined above is the root cause of the problem and given that the sums involved far exceed the maximum possible liquidity increase that the World's central banks can possible consider creating I do not see have the universally acknowledged 'evil' of a stepwise reduction in liquidity can be alleviated.

Has anyone made a global estimate of the proportion of liquidity that has vanished from the hugely unwise action of the commercial banks? Is it a significant proportion of the previously available liquidity - as I suspect? The state of the markets seems to imply that they are reacting to a huge reduction in money.

I am aware of the 70 percent published decrease in UK mortgage liquidity year on year but I am sure that this is an overestimate of the global position - if it isn't then the situation implies that the present slump will be over twice as bad as the 1930s!

The stamp duty change has certainly helped buyers. I was offered £175,000 for my house because of it. Shame it's on the market for £275,000 - under the £290,000 it's worth. Expecting similar offers now as buyers are aware how hard the market is and are trying it on to see who's desperate enough to say yes.

Far better to suspend all HIPS and stamp duty for 6 months to get all of the market going again, not just new buildings for first-timers.

Remember GB used to believe he had a God given right to our money and was a strong advocate of stealth taxes as a way of getting his hands on it..

Try this one on for size...

1. GB makes the Bank of England independent - but he sets the inflation measure to exclude housing costs.
2. The Government is already restricting the supply of land for housing via the planning system.
3. The Government does as much as possible to encourage immigration creating excessive demand for housing.
4. Result - runaway house price inflation.
4. The Government introduces banded stamp duty and fails to uprate the bands in line with inflation and at the same time also fails to increase inheritance tax thresholds in line with inflation.
5. Everyone is conned into thinking they are rich, but GB is the one that ends up with our cash since he has a mechanism for turning our paper profits into hard cash for the Government.

Of course, the chickens have to come home to roost at some point and as house prices now fall, we, the punters, have to bear the whole cost. Don't expect any meaningful help from GB. Gordon the wise has wasted all the cash he conned out of us...

# 69 Nellekins ... your house is "worth" only what the highest bidder will pay for it.

I have been trying to sell my 2 bed terrace for 18 months. I am surrounded by new builds which were not required, but were ordered by Prescott, and are also not selling. Most midland and Northern cities are the same.
The government is now intending to subsidize the new builds with my money to get it self out of the hole that it has created. It is presumable doing this as a sop to house builders. Is it going to subsidize certain cars over others, or Sainsbury over Tescos just because they have plans for future co-operation. This is unfair competition for millions. So we can only sell our house when all the new builds are sold?! It is unjust and unreasonable.

Looks like another 10p moment!
Roger Calver

POST 72
L
Why not knock your house down ,sell the bricks ,your neighbours can buy the land thus converting their homes to semis ,which would fetch a premium in your area which sounds soo anty nimby [who wants neighbours]

As an incentive you can tell them you will otherwise let it to canibals

Housing grants could soon be made available to contribue to housing stock reduction

Remember your home is at risk if you take this advice seriosly ,seek professional help first.

Dr Imani diot ,PHD

POST 72

Why not knock your house down ,sell the bricks ,your neighbours can buy the land thus converting their homes to semis ,which would fetch a premium in your area which sounds soo anty nimby [who wants neighbours]

As an incentive you can tell them you will otherwise let it to canibals

Housing grants could soon be made available to contribue to housing stock reduction

Remember your home is at risk if you take this advice seriosly ,seek professional help first.

Dr Imani diot ,PHD, ,BOE,IOU

PS Alternatively drop the asking price before your non neighbours from hell do

The Chancellor's announcement on
stamp duty was 1) well meaning 2) within the government's room for manouver 3) for limited political effect 4) will make little difference.

The main driver for the improvement in sales in the housing market will be when house prices fall to a level which reflects their market value.

Clearly house prices are still too high due to house price inflation fuelled by a decade of ultra-cheap mortgages. When house prices are shorn of this inflated element, banks will once again start to lend.

Clearly many existing homeowners with mortgages will be hit hard. But just as with the sotckmarket your invesment may rise or fall.

First time buyers may well be the main beneficiaries over the medium term.

Robert Peston says property related tax revenues are collapsing. Has he forgotten the newly introduced empty rates? If it actually takes effect the revenues will be very significant and will grow as the recession bites and more premises become vacant. It is a very pernicious tax because it can only have been introduced on the view that landlords deliberately keep their premises empty and are fair game because they have no vote and no power like the energy companies.

Nothing could be further from the truth. Many wholly innocent small scale landlords who own property as a personal pension will suffer serious effects as a result. Not only will they lose substantial income from the loss of rent as the premises become empty, they will then pay half rates as tax on top. Almost every landlord is subject to the same problems from the smallest right to the largest. Undoubtedly some will demolish their buildings rather than face having to pay the tax for years.

It will also add to the effects of the current property recession as it will inhibit any new speculative development, thus delaying the recovery.

In any other circumstances it would be regarded as the worst thought out tax change for years, but the present government has probably managed to produce several more which are even worse.

30 % Deposit payed for by the taxpayers VIA GOVERNMENT ,sounds like an RIP [ROLLED INTEREST PAYMENT ] mortgage.

Only its the taxpayer that gets rolled impoverishing the next government .

Should the mortgagee[whizz kid ] freed from suffering the loss of the governments equity[ha ha ha and ha] stake ,decide to put his feet and two fingers up [either way round] then the banks can also do the same ,taking their everso, everso, reasonable charges for non payment out of the taxpayers equity thus liqifying their assets

So in con clusion the taxpayer will probably get rolled to infinity and beyond ....

If the government was arround at the time of dutch tulip bulbs ...the mind boggles


IT,LL all end in rigour mortgagis with a pound of flesh as collatteral ,ensuring the lawyers will remain at the top of the food chain and the future pensionerrs at the bottom

Why is the cost of putting a roof over your head treated so differently to the cost of food and energy? They all make the cost living more expensive for large numbers of people in the end.

If the cost of energy starts to fall will the goverment take steps to 'stimulate' the energy markets, doing everything it can to drive the price higher again? Or better yet hand over tax payers cash to the banks so they can provide us with a lifetime of debt to cover our energy costs!

This sounds like a terrible idea, and most people would agree but swap the word energy for housing and you get a quite different response.

I really wish people would wake up to the fact that ever higher house prices only benefit a small group of people (landlords, banks, EAs, politicians, etc).

Replies to:

67- I agree with your sentiments, the root cause of this credit crunch and the previous upheavals in the financial markets, over the past 80 years, is because we have a sub-prine finacial system, based on GREED

69- The money hasn't vanished, it was just artificially created by the banks and money markets, for GREED

70- Gordon Brown doesn't have your money, the Treasury's coffers are empty.

72- The question you need to ask yourself is why did you decide to buy your house instead of renting (for greed perhaps)