Should the government be coming up with schemes to help out the housing market?

[nkf]

I think it will make the long term problem worse.

NO they should not, I agree that they caused alot of (or all of) this problem and they should leave it be. They can't stop it anyway now tbh. What gets me is when (homeowner)people moan about gas/electric etc going up yet are happy for house prices to go through the roof.

I don't see how the government have caused this problem.
Greed has in my opinion. The banks relaxed lending criteria to give more loans than ever before. Look at all the marketing for credit cards and loans that come through the doors and were on TV. Especially those that were pushing for clients with bad or no credit histories. In other words, banks wanted to lend to the sub-prime market as there were perceived to be better profits there. (charging higher interest and arrangement fees etc).
Then look at how many people rushed to take on mortgages at 100%, 125% at ridiculous multiples of their salaries, all of this pushed the prices up as more people bought homes they realistically can't afford.

We're due for a large correction and it is needed. The finance market has always had highs and lows.

Newforold the Govt didn't cause the boom but they created the conditions to fuel it.

When Gordon Brown took housing out of the way that inflation was calculated by switching from the RPI to the CPI, the Bank of England could then keep interest rates low and hence keep borrowed money cheap. If they had been a little more honest with the measurements the B of E could have headed this off at the pass some time ago.

Basically there has been too much cash sloshing around for too long - and that is primarily GB's fault.

And why were banks dying to give more loans than ever before, even to 'subprime' borrowers?

"Greed" isn't a new phenomenon, you know.

The government played a role in this by:
a) continuing the Tory policy of selling off socialised housing and/or not replacing it for rent and not to buy.

b) supporting short-assured tenancy laws, thereby making BTL more attractive

c) not regulating pension funds enough, thereby making people turn to a commodity, property, as an investment vehicle to fill in the void

d) not making certain lending practices illegal

e) many councils encouraged the building - via planning permission- of tens of thousands of small, 2-bed flats, which few people now want

f) tax laws on owning multiple properties

g) stamp duty laws

so it was a combination of banks, borrowers, government, plus some other factors that have led to the inevitable downturn.

I haven't said it is a new phenomenon, i have said it is the biggest reason why we are in a downturn.

It isn't GB's fault that banks overstretched themselves in the sub prime markets, nor is it his fault that people overstretched themselves with credit and mortgages.

Salient points, Cote and wasabi.

yes, agree with expat that government policies played a role, but they are still not the biggest cause.

People weren't threatened with jail if they signed up to a huge mortgage were they?
Colleague of mine got a mortgage self cert for 6 x salary at 100%. He's just about to be repossessed.
He didn't have to take the mortgage, he could have bought a smaller house for a more comfortable rate and worked his way up the ladder like most people do who want to be a homeowner.

Actually newfold it sort of is his fault to some degree - the tripartite system of regulation that he introduced (FSA, Bank of England and Treasury) failed to actually do their job.

There is no way that Northern Rock for instance should have been allowed the carry the debt/capital ratio that it did.

Yes, have just posted that i agree he played some part.

I don't like to see people suffering financially - and the situation is certainly widespread and IMO likely to get much worse before things start to improve.

However I think (as some others have posted):

• Banks and mortgage companies engaged (and encouraged) in poor lending practices
• People lost all perspective and took on hugely expensive properties simply because they were allowed to
• People didn't think longterm - ie, how were they going to manage once the low 'teaser' interest rates expired, or if mortgage rates increased.
• People used the equity in their homes to provide a lifestyle they couldn't afford, and gambled on the fact that home prices/equity would continue to increase rapidly.

I have been fiscally and personally responsible, and don't like the fact that my taxes will be used to bail out irresponsible lenders and borrowers. However, I see that the whole economy could go belly up if something isn't done to help - so think it is inevitable and probably necessary.

That being said, I do think there should be some sort of tax credit/break (no idea how this could be implemented) for those of us who are doing the 'bailing out'. Unfair that we've been personally prudent and paid taxes too, and now should pay again for those institutions/individuals who have been financially foolish/reckless.

"It isn't GB's fault that banks overstretched themselves in the sub prime markets"

As Wasabi said, banks were dying to give credits to subprime borrowers because the market was awash with liquidity. In other words, banks had access to loads of cheap (i.e. low interest) funds and they had to place it somehow. When money is so cheap, risks taken with that money don't appear so high.

Bank of England, just like the Fed in the US, created this excess liquidity and has been sustaining it over many years. The upside is that the resulting wave of high consumption carried both economies fairly well. The downside is that bubbles and overvaluation were created in pretty much all asset classes - housing, stock market, gold, etc.

The thing with the Government and more specifically Gordon Brown, is that they took the credit for the good times but accept no responsibility for the bad times.

I do not think Labour are responsible for the global financial crisis but nor were they responsible for the economic good times we have experienced in recent years. Labour inherited a golden legacy from the Tories when they took power. Sadly they will be handing back a crock of shite.

No.

Funny how inflation in every other area of the economy promotes breast-beating and cries of 'oh the horror'. But the lack of inflation in the housing market has the same effect.

By newforoldspeaksforhughjars on Fri 08-Aug-08 14:27:24
"He's just about to be repossessed.
He didn't have to take the mortgage, he could have bought a smaller house for a more comfortable rate and worked his way up the ladder like most people do who want to be a homeowner. "

When house prices tripled many found their only way of getting on "the ladder" was by overstretching themselves. I see poxy two-bed flats for sale around here asking £440k. Working your way "up the ladder" is damn hard too, when the rungs just keep getting further apart due to hyperinflation in property prices.

I blame the media for insisting that all this misery was a good thing. And the government for making sure that, due to lack of regulation, lack of tenants rights and a sell off of social housing, we in the UK are more exposed to this credit crunch than most other countries.

The 'ladder' is one of those mythical social constructs of the late 20th century that no longer exists, much like the idea that it will be possible for everyone to 'retire' at 60 and sit on their duff swanning around for 30 years collecting state pension and not working and that everyone who is in debt is in that situation because of frivolous purchases.

Waht's needed is a paradigm shift.

And a BIG one.

And it will come about not because people are willing to change their attitudes, but because they will have to.

Excellent points in your last post, Upwind.

But that's kind of my point upwind.
If you can't afford to buy a home without putting yourself at eal risk of financial difficulty then don't buy it.
If the flats in the area are £440k then look in a different area.

No it's not possible for everyone to retire at 60, but then again what do you do about it?
If i keep going earning what i do now and manage to keep up my savings etc then i will retire comfortably at 60, mum on the other hand will have to keep working as she didn't consider getting a pension plan until about 12 yrs ago. It wasn't a priority for her.
Different strokes for different folks.

I haven't said that everyone who is in debt is there because of frivolous purchases. I was in debt and seriously struggling 8 yrs ago as i was a single parent on a low wage with no maintenence and no entitlement to benefits to help unless i stopped work.
I ended up with 2 ccj's and it was awful. However, that's also taught me to be a lot more savvy now.

I still think that alot of the problems seen at the moment are down to greed or naevity.

How many of you seriously think it's sensible to get a 100% mortgage with large multiples of your salary, and to have several credit cards on the go just because credit was cheap?
No one was forced to do that, but they did. We are seeing a large rise in repossesions due to the fixed deals ending and reality biting. That is a correction that is needed in my opinion.
We are not all entitled to own a home and it is not the be all and end all of life. A fair few of my friends rent and have no intention of buying, most of them could afford to though.
I think the european attitude to home ownership is far more healthy, if you do fine, if you don't so what.