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?

I do have sympathy with those who overstretched themselves to buy at the peak of the market (after all, who knows when the peak is?!). It is very, very hard not to get drawn into the idea that because we'd had such a long boom, this is just how things would be from now on. And there were so many people willing to lend so much money, so many 'experts' telling you that prices only ever go up, that you'd have to be very confident not to get sucked in.

We were looking to buy about a year ago, having finally thought after 6 years of renting that the crash we had felt was a certainty might after all be never coming. However when we looked around dh and I both felt we were not prepared to borrow as much as we'd need to buy the kind of house we wanted. So we held off (thankfully). Now that looks like a very good decision, but it could have gone the other way. Had we bought, though, I wouldn't have felt like anyone should be bailing us out. The blame might lie partly with lenders, but ultimately it would have been our decision and we would have had to accept the consqeuences. We worked out what repayments would be if interest rates went up, and decided we couldn't afford it. Isn't that pretty basic?

'Surely everyone has to overextend themselves to get on the housing ladder'

[Shudder]

And we wonder how we got into this mess...

what underlies a lot of this is this huge sense of entitlement. that everyone somehow has a right to own their own home, regardless of factors.

where does this come from?

i'm with upwind, the revision of the tenancy laws, more in line with European standards, would have helped.

but of course, the knock on effect of that is that BTLers would have made so much money and further inflated the market.

Years ago when we took out a mortgage the lender (abbey) insisted we could cover the payments at various rates before the offer was issued.As expat says everyone has a choice if you want to over stretch yourself then you must have something in place if teh inevitable happens.Why should people be bailed out of their own decisions?I think we have seen the last of property=investment.It is a time to return to the days of homes and savings.

I have sympathey for people who have borrowed more than they could afford, but imagine rattling a cup on the high street asking for donatations to help the homeowners!

"HomeOWNERS??? I thought you meant homeless?"

"no, nobody really cares about them, we really must help out the poor unfortunate homeowners. The price of their assets is falling"

"Give me back my money"

now there's a snowball's chance in hell of any revision of tenancy laws, because Labour is terrified of the bubble they helped created even wobble.

sympathy
donatations

obviously

Actually our friends and family really pressured us to get on the ladder even though we truly could not afford it. It was like some weird mania that you must get on the ladder no matter what.

It is probably similar in other pyramid schemes, the people who refused to get involved at the end are resented and the savvy people who started it off make a fortune.

damn that should be donations

I don't know about the tenancy laws expat, the clip I linked to above is a very familiar story. With more awareness of the problems the mood could turn in favour of tenants actually having a reasonable quality of life.

"It is a ALWAYS a choice to get on 'the housing ladder"

Yes that wasn't my point. My point was that it is a bit harsh to blame people for trying to get on the housing ladder for "overextending" themselves. It's never been easy and it isn't now. As Southutsire says, no one (including the Chancellor) can tell where the market is going and people need somewhere to live.

As for the BBC piece, it does say that the credit crunch is immaterial to them. Their issue is about lack of social housing - households on a total income of £22k would always have found it difficult to get on the housing ladder.

that couple had one piece of luck in that they had a council flat. that means their tenancy was assured. they can't be turfed out when the landlord decides to sell.

the majority of private renters are on six-month short-assured tenancies. after the six months are up, the landlord can serve them with notice to quit in 60 days at any time.

meaning, technically, a private renter could find themselves having to move every year or even more often than that, because if the property is repossessed they can be served with notice to quit even before the lease in up in some cases.

and woe betide them if they are on partial housing benefit! they need to find a private landlord willing to accept this, and none are compelled to do so.

'My point was that it is a bit harsh to blame people for trying to get on the housing ladder for "overextending" themselves. It's never been easy and it isn't now. As Southutsire says, no one (including the Chancellor) can tell where the market is going and people need somewhere to live. '

I disagree that it's harsh at all because there's no compulsion to EVER purchase a home.

So it's not easy?

People can rent, you know.

They don't need to buy to have a place to live.

"'Surely everyone has to overextend themselves to get on the housing ladder'

[Shudder]

And we wonder how we got into this mess... "

Unless you bought your property outright with cash, you are overextending yourself. Borrowing to make up funds you don't have.

'Unless you bought your property outright with cash, you are overextending yourself. Borrowing to make up funds you don't have. '

Overextending is when you borrow so much that relatively slight wobbles in the economy make you unable to pay back the loan.

Or you stretched so much you don't have room in the budget to ensure yourself against not being able to pay that loan for reasons beyond your control.

That's true, expat. Everyone can rent.

Problem is, that is not the economy we live in. People want to get out of the situation portrayed in the BBC clip (nasty private rented place) so the options are social housing (but there are none) or buy (too expensive).

Some private rented places are fine I'm sure but others are not and I think it's natural for people to want the long term security that comes with home owning.

'Problem is, that is not the economy we live in. '

For an increasing number of people, it is.

Those people were council renters. If they are applying to the council for repairs, they are council tenants, as the council is their landlord. Otherwise, if they were private renters, they'd be going to their BTL landlord.

'People want to get out of the situation portrayed in the BBC clip (nasty private rented place) so the options are social housing (but there are none) or buy (too expensive).

Some private rented places are fine I'm sure but others are not and I think it's natural for people to want the long term security that comes with home owning. '

I'm sure they do. I wouldn't mind myself.

BUT, that is not a right or an entitlement.

So a person who takes the decision to do so should not expect taxpayers - or anyone - to bail them out when that decision proves to be a financially poor one.

It was my original terminology and in my sentence, overextending can also mean having to stretch and pinch to make ends meet for a while.

That's normal surely. You buy a place and you can't afford to furnish it properly for a few months so you have borrowed bits and bobs and live in a bit of chaos for a while. That's what I did.

What's difficult is working out what's sustainable borrowing and what's not. 6 times salary with no deposit is always unsustainable. But 3.5 times salary with two incomes? What about 3.5 times salary with two incomes but maybe you might have a baby? I'm just saying these questions are not simple.

I'm not in a position to judge what's going to happen to the economy tomorrow, despite being an economist. That's why I feel it's harsh to judge those who were just trying to do what they thought made sense.

Expat, again, see my earlier posts. This cash does not bail out house buyers. This cash bails out banks (temporarily).

You probably like this even less but this is not about housebuyers. This is about banking.

Nah, I reckon overextending means, well, 'over', ie 'too much' extending. The definition lies within the word!

it's about the stability of banks who have lent money for mortgages, margo.

i am well aware of that.

it's to try to stabilise these banks who made irresponsible mortgage loans to people who borrowed irresponsibly.

'you'll like this even less'.

eh?

"houses are not like shares/pensions they just aren't"

No, I absolutely agree with that, whoever said it. However, people have been speculating on houses in the way that other speculate on shares or gold. Houses are for people to live in, not to make a fast buck out of.

the age-old economic fallout that comes from using commodities as investment vehicles.

'Unlike you, however, I don't expect the taxpayer to prop me up for financial decisions I made or feel angry at people who made poor decisions - unless they expect the taxpayers to bail them out of that.'

How on earth do you know that i expect that expat? I don't. Neither do I think that is what is happening. I was just trying to point out that so many people have profited in ways you and I can't imagine from the housing boom, and perhaps they should pay something back in. I don't feel strongly that they should actually, but i think it makes about as much sense as blaming people who tried to buy homes for their families in the last couple of years. People who bought earlier, many of who mortgaged themselves to the hilt, where just bloody lucky, no more sensible.

Figroll i admitted i was angry. I even apologised. If there isn't anger on the other side there is certainly callousness. IMO.

I profited in teh last few years and sold up last summer and put my money away and am now renting.I also lost heavily in the 90s so I was speculating but when I was at a loss i sold up and moved into a small flat I didn't ask anyone to bail me out.I certainly don't feel as if I should put what i made back in.If you speculate on property you take the rough with the smooth If you weren't expecting your property to keep rising none of this would bother you.

I have been thinking about this and I reckon the media are largely to blame - the newspapers and tv programmes droned on about "resale value" and "adding value through improvements". In the last few years I have heard so many people say in hushed tones "a conservatory would add 20k to the value", "converting the garage would be a great investment".

If houses were merely homes than we wouldn't be obsessed with them. We wouldn't need to commute so much and we could all have nicer ones as there would not be a premium added by the property-as-a-pension people! Ruty, you are right, the people who profited the most from this boom have been licking their lips greedily and not giving a damn about the effects on others. Vut I still don't think we should try to compensate people who chose to borrow more than they could afford, or opted not to take out insurance.

I've just seen the Times headline. I guess the 50 billion is really not going to stop prices from falling. Only worry is if the existing crop of amateur landlords try to up the rents so their tenants pay the full cost of their mortgage.

business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3818913.ece