From the BBC:
Councils are to help first-time buyers get on the housing ladder by topping up their deposits.
Five councils are pioneering a scheme aimed at buyers who can afford the monthly mortgage repayments but do not have a lump sum saved up. Many first-time buyers find it difficult to purchase a home because lenders are asking for hefty deposits.
The councils will put 20% of the price in a Lloyds TSB account, with the lender asking for a 5% deposit. The funds will not go to the buyer and the mortgage rate will be lower. The councils risk losing money if a buyer defaults, but they get a generous interest rate themselves...
Madness.
If the council wants certain people to be able to afford a house, it doesn't need to spend or risk any money, it could just give those young people 'struggling to get on the housing ladder' planning permission for a house, which will be worth far more than the the 20% deposit paid.
In any event, I hope this scheme is being paid for out of Council Tax - it will be interesting to see whether it is possible to support the price of a good with a subsidy funded out of the tax on the subsidised good itself.
Wednesday, 16 March 2011
Another day, another reckless throw of the dice (39)
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15 comments:
Re final paragraph: it's even more ingenious than that implies. The council aren't paying upfront for the houses - they're accepting an excessive level of risk in exchange for slightly, but not commensurately, higher returns. So if the markets don't crash during the scheme's duration, then the council will appear to have made a profit. And if they do, then it'll be an Exceptional Loss, Nobody Could Have Seen It Coming, and will be filed away in the "exceptionals" pile.
Bastards.
Getting the "best of intentions excuse" prize is councillor Paul Campbell, for his "We hope the money will help 250 people on to the housing ladder, which in turn would release other people to buy bigger homes and boost the local economy," and you really have to applaud the use of "release" there - releasing people from the extreme burden of wanting to sell their over valued over priced house and be able to go buy a bigger one, that really is nice - one wonders what other "schemes" Warrington Council have for "helping out" any of their employees who lose their jobs as a result of "budgetary cutbacks"- what am I saying, if Warrington is so flush it can afford to subsidise mortgages why would it need to make "cuts" !!!
Agreed. And this among many other innitiatives from banks and Govt is propping up an artificially inflated housing market.
If I may say there is no shortage of accommodation in Britain. Just an unrealistic expectation of how much room one is entitled to.
Plently of spare bedrooms and empty houses available. We haven't learned to cut our cloth yet but will be forced to soon enough.
Yeah... the council could just encourage self-build by providing land they already own at its current value (without planning) then give it planning permission afterwards.
Of course the council would be better off building more social housing on their own land and I don't actually agree with the above BUT that would be preferable as they don't have to actually spend any money. They would MAKE money!!
Having proved I'm not deliberately contrarian (I agree with much of your opinion) I've added another comment to the smoking debate.
I did not whether to laugh or cry on hearing this.
The council's money comes from tax payers and now rather than spend it on local infrastructure they are going to give it straight to the banks.
I suppose they are simply copying what central government is doing.
JB, yes, the finer details are that the council provides fully funded 'higher lending charge insurance' to the bank and the bank is making a handsome cut either way.
Anon, excellent. Maybe the councillor can think this through and point out that people in the biggest homes (who sell them to the people trading up etc) can be "released" to down-size. Isn't this what I always call 'right-sizing'?
EK, yup, I call this 'right-sizing' (and is something which LVT would sort out in a twinkling).
SW, either building more council housing or granting planning permission to people rather than land owners would be far cheaper, better etc (could even make money for the council if they do it right) at virtually no risk or cost.
DNAse, I think "cry" is appropriate here. No doubt once all councils are doing it, the UK government will roll out a national scheme.
It's even worse than just providing state-backed low-interest mortgages (which would be bad enough) because this way the banks make a handsome, risk-free profit as well.
Ithink you should tell us the cost in terms of £ per vote gained.
Most of the comments on the telegraph article are sensible too...
D, look at the comments under the corresponding articles on BBC, Torygraph, Daily Mail, Guardian, they are almost all against the idea.
So the cost per vote gained will be tens of thousands of pounds (i.e. only people who qualify will vote for it, and they are stupid to want to take part, but hey).
AC1, everybody thinks it's mad.
If we weren’t all paying thru the nose to fund the “too big to fail” implicit subsidy that banks get, we’d all have enough money to go out and buy a house for cash, while sticking two fingers up at banks and their “mortgage offers”. Well, slight exaggeration, but you get my point.
M, that's not really an exaggeration at all, that's how it is.
"because this way the banks make a handsome, risk-free profit as well"
Which is presumably the fons et origo of the whole scheme.
Mark,
So the cost per vote gained will be tens of thousands of pounds (i.e. only people who qualify will vote for it, and they are stupid to want to take part, but hey).
But it's part of sustaining the general madness of "house prices will go above inflation or earnings. forever.".
It's funny how people laugh at things like the Albanian economy collapsing due to everyone signing up for a pyramid scheme, yet homeownerism is just the same sort of zero-sum game. But it's almost heresy to point out that it doesn't create wealth and instead creates random winners and losers.
Let me guess - will this scheme be directed at 'key workers' providing 'vital local services'?
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