Monday, 27 July 2009

Government considers guaranteeing mortgages

Is there no end to this madness? Why should a renter have her tax receipts used to subsidize a first time buyer who wants to buy a home?

Why doesn't the government consider subsidizing rents? Why not offer guarantees for any renter unable to pay their rent? That way, I could find the big house somewhere in Hampstead, which I can't afford, rent it, default on my payments and then hand the bill over the Her Majesty's Treasury.

This proposal to guarantee mortgages would be so unfair. In fact, it is inequitable. I wonder whether Ms. Harman's new equality legislation could be used to outlaw this kind of guarantee?

From today's Guardian....

First time home buyers could be thrown a lifeline under plans being considered by the Treasury to underwrite 'risky' mortgages, allowing people with only small deposits to buy homes.

Since the credit crunch took hold, banks have demanded far tougher criteria for lending, asking buyers to provide between 25% and 30% of the price of a home as a deposit.

There were 30,000 loans to first time buyers in the first three months of 2009 against an average of more than 100,000 a quarter in the previous decade.


powerman said...
This comment has been removed by the author.
powerman said...

They do subsidize rent. It's called housing benefit. New Labour have really worked hard at trying to make the diligent, working classes dependent on state handouts, so this is a natural step.

Alice Cook said...


I accept you have a point, but not every renter is unemployed.


Anonymous said...

Ugh, they do this in Canada now, and I'm not looking forward to what's gonna happen in the next 5-10 years by which time our bubble has burst, and the government is left saying, "Wait, we owe how much for covering those mortgages?" =(

Anonymous said...

Alice - I accept that you may feel annoyed by this (and I'm not defending it BTW) but hasn't all council and social housing been government subsidised (both locally and indirectly at a national level) for an age?

Ultimately you could take advantage of this form of benefit by getting yourself on the council waiting list.

Rent-buy schemes are also government subsidised.


Mark Wadsworth said...

What Powerman says.

As to Chris' comment, if we strip out Housing Benefit for social tenants, social housing as a whole makes a profit for the taxpayer which is used to cross-subsidise Housing Benefit.

And hey, even poor people have to live somewhere, I can't see how you can have objections to subsidising the very poorest.

Liam said...

Housing benefit acually supports property prices. HB sets the baseline rent and in my opinon i is far too generous. Horrible 1-2 bed flats in deprived areas of the north can now be rented out at £300-450pm because the local council will pay those rent.

And I also hear if you can justify living in west london the coucil will pay whatever it takes. Insane! HB needs to be scrapped and replaced with a fixed rate rent subsidy, of say £50pw for sigles outside london.

And in any case isnt the offical line that there's a housing shortage? Surely the obvious solution is to get building houses not printing £50 notes?

Liam said...

oh yeah, and the Guardian article also conveniently omits that the reason FTB number have been decimated in recent years is due to being muscled out property investors.

The truth is the politicians don't give a sh t about FTBs as long someone keeps buying and prices keep rising to keep their core voters happy.

Alice Cook said...

I agree with Liam, FTB disappeared because property prices increased. The government doesn't care a fig about FTBers.

FTBers would benefit from further price falls. These guarantees will prop up prices, leaving the vast majority of FTBers out in the cold.


Anonymous said...

Enjoy being out in the cold Alice!

Anonymous said...

The housing benefit system is another thing that needs radical change. The state should provide social housing for the poor. The rent should be a percentage of the income of the renter. That way a poor person with nothing will pay nothing, a renter with a Jimmy Saville income will pay so much they are better off in private rented or owned housing. The housing benefit system is a huge misallocation of resources which in itself is contributing to the first time buyer's problem because buy to letters bid up all the low end houses in the hope of getting a rent cheque from the council every month.

There is a responsibilty on society to look after the poor. It needs to done efficiently, and with the minimum of impact on the free market. The present system reinforces dependency and maintains people in poverty.

Mark Wadsworth said...

Anon says: "The rent should be a percentage of the income of the renter."

That is a most excellent plan and is already part of UKIP's draft welfare/housing policy. Fiscally neutral would be about 20% of tenants' incomes, which can be dealt with by giving them a different PAYE code.