Wednesday, 11 March 2009
There's No Place Like Home
There is a good deal of heavy breathing in the media after announcements of the large amounts of money about to be sluiced into the housing market, notably by RBS and other banking subsidiaries (owners?) of the British Government. Given the substantial holdings of property assets by the members of the London Mediocracy, our governing political and media clique, and the obsessions of key centre swing voters in the most marginal constituencies this comes as no surprise. So bust banks to borrow, and then lend as if there were no tomorrow?
So what kind of lending? A long time ago the conventional mortgage deal was two and a half times the real major household source of income. No second income, no overtime pay, no bonuses or commissions. Even with these limits for the average household money was tight. But then, state taxation, local taxation in towns, food prices, clothing prices, and motoring costs were all relatively higher than has been the case for a decade or two now. There has been a note of horror at the suggestion that mortgages could now be limited to only four times joint incomes, loosely defined. It seems that six or seven times has been the norm.
The government plans seem to be based on the assumption that households will have the benefit of the low price levels of the past. This is not going to be the case, notably on taxation, incomes are already being squeezed. Moreover, as much spending in the immediate past has been on credit, if that is curtailed what happens? With low interest rates, many savers are pulling out, and few other people are going to be able to save. How is the government going to sell all its loan tranches at low interest levels and with sterling at significantly low value?
Does the government really think that buyers can take on the financial burdens and debt as in recent years? A lot of mortgage lending has been in remortgages, second mortgages, second and third homes, and equity release schemes. The government is crying housing shortage when half the homes in rural and coastal areas, or more, are priced out of the reach of the local population. In the mean time the buy to let sector has bombed, rentals are curtailed, and allegedly there are three hundred thousand flats vacant and nearly a million homes unoccupied.
This is not a policy, it is simply a gadarene rush to be first to the lifeboats by a selfish elite.