50 bn quid to 'increase liquidity' in the housing market? What madness is this?

[miljee]

What DO our government think they're doing? What on earth use is potentially further inflating the house price bubble? I gather the premise is that house prices are falling because the bottom tier has effectively collapsed as 1st time buyers are now hopelessly outpriced and the mortgage companies suddenly haven't got the easy cash to lend any more- so the government is 'lending' money to the mortgage companies so they can go on throwing unrepayable mortgages at 1st time buyers at eye-watering multiples of their incomes?

I hope all potential 1st time buyers sit tight and wait and see.

But where is the sense in effectively sustaining unsustainable debt yet further? I hate to say it but I have little sympathy with anyone now in financial trouble who took out one of these mortgages any time over the last couple of years. Surely it was evident that something had to give? Maybe they should have been lobbying their MPs for far better terms and conditions for renting (which would have had the added effect of curbing the amateur buy-to-let landlord, too!). But now the government is compounding that irresponsibility by attempting to stave off the inevitable- and depriving potential 1st time buyers of the chance to buy those repossessed or buy-to-lets that should come onto the market. Why?

and you have no idea if this is actually going to subsidize the mortgage payer. If it makes you feel better it won't make a blind bit of difference to our mortgage. It is to help out the banks, who i agree, should not have been recklessly handing out 100% mortgages, etc.

ruty, not everyone who bought in the past couple of years will have difficulty paying their mortgage.

only those who over-committed themselves and didn't buy insurance to cover themselves in such an event as redundancy.

and people don't HAVE to buy a home if it's going to be such a tight squeeze.

it's a choice they made, not compulsory.

they are not propping up though expat- they are simply adding liquidity. The government/taxpayer will get this money back -it's a loan, with interest. It's actually a fairly bold and well timed move (by the Bank of England, not the govt) to restore market confidence, and as margo said, that doesn't just help bankers, it helps everyone. If money markets lose confidence there is no flow of money, and without money flow there can be no growth - it's basic economics. No growth doesn't mean no growth in house prices (which I agree would not be a bad thing) but no growth overall, a stagnant economy, possibly even a recession. And that is bad for everybody.

margo I think you are right, sentiment has just gone against the government (for lots of good reasons) and so they can't do anything right. It's sad that politics has beome divorced from policies and that people form their opinions based on gut feel, personalities and media spin.

yes you said that expat i agree. So what. I don't have a 100% mortgage and we do have insurance [which we pay through the nose for] But this cash injection won't help us. If you think this will stop the market falling then i don't agree. Why attack people who were just doing what so many have done for so long - try to buy a property. they just did it at the wrong time. They're not all bloody market analysts. Blame the banks, the government, and those stupid property 'your house will always rise in value' shows.

'The government/taxpayer will get this money back -it's a loan, with interest. '

HAAHAAHAAAH. Sure they will!

I believe that about as much as I believe any word that comes out of Gordon Brown's mouth.

Where did all the profits go when they were riding high?

Why are we continually nationalising loss and privatising profits, as one saavy poster pointed out?

NO ONE is 'attacking', ruty! Upwind tried to point that out to you about a hundred times.

People just don't see why mortgage holders are somehow any different to anyone else and why they should be treated accordingly.

thank you Prufrock for being so well informed and explaining without my knee jerk reaction.

they bloody well are expat.

'It's sad that politics has beome divorced from policies and that people form their opinions based on gut feel, personalities and media spin. '

Get real, Pru. People have seen their cost of living go up up up and their take-home earnings go down, down, down.

THAT is what is driving them. Pounds and pence, not gut feelings and spin.

They're SICK of continually being ripped off and just expected to put up with it and being told by the government they're not saving enough as well.

You see it that way because it applies to YOU, ruty.

NOT EVERYONE who bought in the past couple of yeas or when prices were at their peak will struggle.

People have tried to point that out to you.

Ruty you are really angry about this, it comes across in your posts - but be angry with the banks and the govt who have allowed the situation to just keep rolling along and now want to keep it going again.

The housing market was heading for a fall in 2005, but then interest rates were lowered and it just kept on going. All the tv programmes about housing didn't help - how to make a million from houses was a bit irresponsible as housing is something that people need and all that speculation led to huge demand, and price rises, together with reckless lending.

There seems to have been a loss of reality - that housing is the great money maker. I think a lot of housing investors are starting to wake up to may be being wrong, but unfortunately people who have bought recently may find themselves in negative equity. This shouldn't matter if you can afford your mortgage and you are happy where you live.

By the way I am certainly not attacking you - why would I do that? I don't even know you.

I think in some way the Govt has to step in here otherwise people will lose their houses through repossessions and the demand on local authority housing will be all the greater. So in a way it is the lesser of two evils.
If you talk about low interest rates then really you have to blame the US and the Eurozone since they held rates at an extremely low level for a long time and that is where alot of the funding for the UK banks came from. The rates in the UK were comparatively high compared to the Eurozone and the US as I remember comparing them at the time. (People were considering getting mortgages linked the the European Interest rate as it was so much cheaper at the time)

then build more socialised housing.

I totally agree but how long would that take and where? We already have such a housing shortgage in the UK especaily in the South East.
The Govt would argue that most social housing needs is taking place through Housing Associations which in my mind is a poor deal as well for thiose trying to get on the housing ladder.
Don't forget when all the public housing was sold off through the right to buys did the local authorities build more housing with the monies they recieved? No they left it in a pot and complained how they could not use the money to boost local services etc.

See, that is what they should have done - replace the social housing lost through right to buy.

But instead their policies just inflated the housing bubble and now even more people stand to lose than just those who can't afford to buy anything anywhere.

How's this going to solve it?

Two wrongs don't make a right.

See, that is what they should have done - replace the social housing lost through right to buy.

But instead their policies just inflated the housing bubble and now even more people stand to lose than just those who can't afford to buy anything anywhere.

How's this going to solve it?

Two wrongs don't make a right.

'just as stupid as blaming those who bought in the last couple of years novice camper'

Would you like to point out where I did that then? I never mentioned it! I merely responded to your comment.

Prufock - this move transfers risk to the taxpayer. We might get our money back or we might not. If risk was cost free, we would not have to pay for insurance!

As figroll explained, the anger is not just because of this intervention now but because Labour failed to keep their promises and did nothing about unsustainable hyper inflation in house prices putting our economy at risk. Interest rates were not the only tool available - they could have improved private tenants' security of tenure to reduce the desperation to get on the property ladder.

• they could have replaced social housing making it an option for more people in need of it.
• they could have taken their regulatory responsibilities seriously and either taken steps to prevent banks like Northern Rock from taking crazy risks or warned that there would be no intervention should their gambles fail to pay off.
• they could have relaxed the planning laws to allowed more homes to be built, if your policies involve population growth and very tight restrictions on building there will always be problems.

I think the risk stays with the banks under this deal actually. See here.

Noone would be happier than me if house prices fell by 30%, and I'm enraged by the utterly greedy and irresponsible "bonus culture" of bankers that has contributed to this situation, but the damage has been done, and as far as I can see this Bank of England move seems like a good compromise under pretty dire circumstances.

To a point though those who bought in the last five are do have nobody to blame but themselves, if everyone sat tight and refused to pay the prices, even though the bank would lend it to them then prices would be pushed down.
Now prices will be forced down because the banks can't lend but that shouldn't be the case.
I blame the Buy to Let brigade, they should have been taxed to the hilt from day one and not allowed to use a basic human right for shelter be a bloody pension fund, they are business' and should pay business tax never mind offsetting the mortgage interest and then claiming to live in the property for 6 months to avoid capital gains, it makes my bloody boil.

I agree Katie, but house prices seem to gather momentum with talk of rises. I can remember someone saying to me in 1988 that if I didn't move now I would never in my life time ever be able to afford a house again and I believe people probably said that this time as well.

No one wants to be left behind in the race to be "in" - just like the dot come boom in 1999. Everyone wanted a piece of the action and when that happens it is usually a good sign that things are on the wane!

The FT link is a good one - I think Mervyn King has actually been warning people of a bubble in house prices for some time now.

i'm angry about phrases used here like 'fools', 'tough shit' if you have problems with your mortgage, and claims of people not taking personal responsibility for financial decisions made. I see anger that people here were feeling quite satisfied at seeing some people who bought recently in real trouble, people who were trying to do the best for their children and families, and now they feel that isn't going to happen, which isn't true anyway. Your anger is directed in the wrong place, as i have said before.

Er, yes, but I didn't say anything of the sort did I?