Another day, another reckless throw of the dice (28)

More bright ideas on how to reflate the house price bubble from The 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...

If the Treasury copied the [Canadian] scheme (1) it might have to act as the insurer in the first instance before stepping back to underwrite insurance from private sector companies – opening the government to considerable criticism as it would put further taxpayer money at risk at a time when public finances are already stretched (2)...

The idea is being pushed by specialist insurers who might sell the necessary insurance to the banks. Genworth Financial, a US-based company, is among those to have submitted proposals... "We urge the government to consider developing a partnership with mortgage insurance providers in order to prudently and efficiently provide a lasting and sustainable solution for the wholesale mortgage market (3)," Genworth said.

(1) As to Canada, I refer to this article:

Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for over-consumption that the U.S. code does: interest on your mortgage isn't deductible up north. In addition, home loans in the United States are "non-recourse," which basically means that if you go belly up on a bad mortgage, it's mostly the bank's problem. In Canada, it's yours.

In other words, the simple lack of subsidies and the fact that you can't just 'hand back the keys' has led to a more stable housing market in Canada. If "we" really wanted housing to be affordable (and it is quite clear that "we" in the UK collectively do not), we can either increase supply or reduce the subsidies, or choke of price bubbles by taxing land and property more and incomes and production less.

(2) As Alice Cook says, "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?"

(3) "developing a partnership", "providers", "prudent", "efficient", "sustainable"? They appear to have learned NulabSpeak from a three-year old dictionary.