Glorious bit of landlord squealing

From the BBC, a few highlights:

Six thousand jobs are at risk in a drastic attempt to save [House of Fraser] from collapse. If the rescue plan fails, administration is likely. But High Street landlords are furious about the way they're being treated. They are the creditors who have to shoulder the burden of financial losses.

Many properties are owned by institutional investors who rely on store leases to provide a steady income stream for pension funds and insurers. Take the House of Fraser store in Milton Keynes. It's part of a shopping centre co-owned by Hermes Investment Management. Its rent generates long-term funding for two big pension schemes.

"Landlords are in an invidious position. We enter into these long-term contracts in good faith, with pensioners' income and security often at stake," says Chris Taylor, head of private markets at Hermes Investment Management.

House of Fraser is using what's called a company voluntary arrangement (CVA), a form of insolvency proceedings, to overhaul its business...

The plan requires approval from 75% of its unsecured creditors. All creditors get a vote, but the value of the vote depends on how much they are owed.

Under insolvency rules, landlords' claims are already heavily discounted because of how accountants judge their losses. The issue for landlords is that their "say" or voting rights in the CVA process is discounted by a further 75%, which they believe is grossly unfair.

The BBC understands that even if most landlords vote against the plan, they won't have enough clout to win the day.

"With landlords' voting power reduced by 75% of the value of their claims, the dice are clearly loaded against them in the CVA process," says Mark Fry, from the restructuring firm Begbies Traynor... "Even if the majority of landlords were to vote against the CVA, that would not be enough to stop it being approved in its current form, leaving landlords taking all the pain of the CVA process whilst House of Fraser's shareholder takes out £70m."

I'd never heard of that reduced-votes-for-landlords rule, but it sounds eminently sensible to me.

Ouch that hurt, but let's try again...

Torygraph hack Matthew Lynn has found some interesting stats on housing in Europe:

* The UK is now fourth from bottom of all 28 member states for homeownership
* 96% of Romanians live in owner occupied housing
* The average British home is now 96 square metres, the smallest in Europe

He suggests we might like to worry that the disenfranchised might turn to "populist, brain-dead redistributionist politics of the sort pushed by Jeremy Corbyn". But fear not, for Mr Lynn has a populist, brain-dead redistributionist solution of his own:

  ... why not re-introduce mortgage interest tax relief, abolished in the 1980s? That was the one policy that kick-started home ownership and it makes getting on the property ladder dramatically more affordable.

One last roll of the dice?  They wouldn't, would they?

Another day, another desperate throw of the dice (46, approximately)

From the BBC:

A new scheme to prompt banks and other lenders to make more money available to homeowners and businesses has come into operation.

Under the Funding for Lending initiative, the Bank of England will lend money at below-market rates to the financial institutions. The Bank will then monitor their progress in lending the cash out.

If they want businesses to have more money, they could just cut taxes on business a bit, and we also know that there never was much lending to businesses anyway, so why, I wonder, do homeowners need to borrow so much money?

But the lower borrowing costs being introduced by mortgage lenders are so far only being offered to people with large deposits.

Aaron Strutt, at mortgage brokers Trinity Financial, said: "Most deals attractive to first-time buyers, such as those at 90% or 95% loan-to-value, have not changed yet."

The introduction of the new lending scheme comes as the Nationwide building society said house prices had fallen last month for the fourth time in five months. The decline of 0.7% in July means prices are now 2.6% lower than they were a year ago, at an average of £164,389.

Oh I see.

They don't want to make more money available to homeowners or even homebuyers, all that cheap money is going to end up in the hands of homesellers. They are desperately trying to keep house prices up, which clearly is only for the benefit of people who own a house but don't need it, which is hardly a big chunk of the electorate, so mainly this is for the benefit of the usual suspects, the large landowners and banks, who will of course be paying "below-market rates" for all this lovely money the taxpayer is being forced to lend them merely so that some of them can borrow it back at, presumably, "market rates".

Building Societies Now More Liable to Failure

From the Daily Mail

The Treasury is considering allowing mutuals – such as Chelsea, Nationwide and Yorkshire - to raise more funding from so-called non-members. Members include customers with mortgage borrowing and shareholding investors.

Building societies presently can currently only source 50 per cent of their funding from non-members. The ability for societies to source increased funding from non-members would be an advantage if wholesale money markets became cheaper in the future.

Sounds like yet another desperate throw of the dice in trying to inflate house prices.

I'm not sure when the 50% rule was introduced, but its effect in the last boom was that it moderated risk-taking. Nationwide couldn't do the crazy things that Northern Rock did with the money markets because their growth was limited by savers. For government-guaranteed organisations, this is a good thing. But rather than retaining that rather sensible measure, the government are going to scrap it.

"Gangs of con artists prey on London"

From The Evening Standard:

Greedy and corrupt MPs today called for action to tackle a rise in the number of gangs staging illegal gambling games on Westminster Bridge. They said con artists operating in the shadow of Parliament were threatening to blight London's image in the run up to the Olympics, the cost of which over ran by about 400% once all the insiders had lined their own pockets.

As many as nine gangs playing fraudulent dice or 'three card trick' games have been seen operating on the bridge in recent weeks fleecing tourists and visitors to the capital. The call came as police took time off from boozy meetings with journalists to launch a series of raids across the capital to target gangs engaged in pick-pocketing, fake designer bag thefts and illegal gaming.

Mark Field, the Cities of London and Westminster MP, said several constituents had alerted him to the growing problem of gamers on Westminster Bridge. He said : "It is a clear problem that we get in this part of town. We Tories are underfunding the police so there is a limited amount of police resources they have to move people on. It is a blight, it happens every year. It runs the risk of undermining a very important time when we want to showcase London to the world."

Falkirk MP Eric Joyce, whose constituency's unemployment rate has remained consistently higher than Scotland's average over the past three years, took time off from his stressful MPs job with gold-plated pension to tweet: "Seven dice games blocking whole pavement on north half of Westminster Bridge. Why do cops allow?"

Gangs typically operate with a dealer, a banker and two 'players' who pretend to be members of the public while two 'heavies' look out for police and step in when people complain. Tourists see people 'win' £100 and join the game but then lose £20.

Colin Wiles, 55, a housing consultant from Cambridge, said he saw "eight or nine" of the gangs on Westminster Bridge last month when he came to London to visit his daughter. He said: "There were six or seven in each gang, a few of them were stood around while one of them did it. I didn't see a single policeman anywhere. I woudn't mind if they were just robbing poor people in Brick Lane or somewhere on the margins, I mean who cares about them, but to see them robbing relatively wealthy tourists under the nose of the Houses of Parliament is a slap in the face for aspiration. It gives a really bad impression of London, especially in Olympics year."

Duwayne Brooks, a Lewisham Liberal Democrat councillor, whose parents used a highly unusual spelling of a Gaelic name meaning "dark" or "black" and who was once best friend of murdered teenager Stephen Lawrence - presumably before rather than after he was murdered - also tweeted about the Turkish and eastern European gangs.

He said: "Bloody foreigners. They're always there. Sometimes I've seen as many as nine gangs. They should be dealt with. Send them back home, I ask you, this country is going to the dogs. But it's difficult, if you arrest them, they will be given bail. They're just going to go out and do it again. Enoch was right."

Taxi driver Stuart Wild, 66, said he often drove past the gangs. He said : "I cannot believe the extent to which this is happening - it's totally out of control.... yeah, Euston to St Pancras, that'll be £25, sir... hanging's too good for them... I haven't got change for a £50 note, no, but it's another £20 for luggage... and the bloody minicab drivers, stealing my customers, all darkies they are... is a fiver all right for a tip... call it quits shall we?"

Scotland Yard said police were carrying out operations in 10 boroughs today to disrupt the gangs. Which was a bit of a waste of time seeing as they knew perfectly well that the con artists are working on Westminster Bridge.

Another day, another desperate throw of the dice (45)

From The Daily Mail:

Banks should offer ‘mates mortgages’ to help groups of friends buy a home together, a Government minister will say today.

Grant Shapps will urge lending giants to send a lifeline to the record numbers of first-time buyers struggling to get on the property ladder. The housing minister said that without urgent help from banks a generation of young people would be locked out of the market. The answer, he suggested, was a radical and new type of lending that he called ‘mates mortgages’.

In most parts of the country it is almost impossible for a young person with a full-time job to buy a home on their own. The average salary of workers in their 20s is £21,000 whereas the cost of the average home is around £160,000. As a result, only those on much higher salaries or with family money can put down a deposit on a house.

Mr Shapps said: ‘If there are mates who are perfectly capable of paying monthly mortgage payments but are struggling to fund a deposit of their own, there should be straightforward options to unite with their friends and take the first step on to the housing ladder together.’

I'm sure you can all see several flaws in that.

Another day, another reckless throw of the dice (44)

From the BBC:

"A London council is to help families get on the housing ladder by offering tenants and first-time buyers £50,000 deposits. Wandsworth councillors will discuss plans to set up a special "deposit fund" to help low-income families...

The council is to lobby Government for the financial freedom to create a "deposit pool" funded from the sale of council housing and future development. Initially, interest-free deposits of up to £50,000 would be repaid back into the fund once the property was eventually sold."

I refuse to believe that a council could, collectively, be so stupid as to imagine that this will help those whom it is supposed to help and assume that this is downright corruption, i.e. maybe a lot of the councillors own buy-to-let flats in the area and they want to be able to sell them at a high a price as possible.

What this council cheerfully overlooks is that it is a f-ing council!

If the council gives somebody an interest-free loan, repayable when the home is sold, then it is effectively part-owner of that home but is not charging rent for it and is bearing a lot of the risk of the value falling. That's about the worst position you could be in.

Alternatively, for £50,000 they can build a whole flat or maybe a small house and own it outright. Sure, land is expensive round there, but it's actually only land with planning permission which is expensive. Land without planning permission is pretty cheap wherever it is. And the council is in charge of granting planning permission, so it can give itself planning permission for free. Problem solved.

Same day, another reckless throw of the dice (43)

From the DCLG website:

Grant Shapps said: "With 80 per cent of young first-time buyers depending on parental help, I am determined that we pull out all the stops to help those who want to take their first steps onto the property ladder.

"FirstBuy will do just that - a Government-backed scheme making £500 million available to offer a valuable alternative to the Bank of Mum and Dad. Over the next two years, this will help as many as 10,000 people in England to get that much-needed deposit together and realise their dreams of owning their own home.

"And because this help will be available on newly-built properties, it will also offer a much-needed boost to our housebuilding industry, supporting thousands of jobs across the country."

Stewart Baseley, executive chairman of the Housebuilders Federation, said: "Firstbuy will help first time buyers, boost economic growth and provide a vital shot in the arm for the house-building industry. Our members have reacted decisively to support FirstBuy and recognise the scheme is an important first step."

Or, they could just stop trying to prop up house prices and let young people get on the ladder without being saddled with extra debts of £50,000? That would be good for the taxpayer, good for the first time buyer and good for the economy. It would, of course, be bad for existing home owners, land owners and banks... ah, right.

And no, propping up house prices and underwriting the value of home-builders' land banks does NOT boost economic growth, in case you were wondering.

Another day, another reckless throw of the dice (42)

From The Daily Express:

EX-cabinet minister Lord Deben, formerly John Gummer, is among the directors of a new investment and mortgage business promising “to breathe new life into the housing market”.

Newly formed Castle Trust will offer investors the chance to make returns based on house prices. Funds raised will provide householders with loans known as a “partnership mortgage” of 20 per cent of their home’s value. They will not make monthly repayments but after a set period must repay the loan plus 40 per cent of any rise in value. Castle’s key backer is the US private equity firm JC Flowers.

Its seven part-time directors include Gummer, former Financial Services Authority chairman Sir Callum McCarthy and former National Consumer Council chairman Dame Deirdre Hutton.

As I commented over at HPC, These people really are gambling on there being people with a lot more money than sense.

Logic says that

A. Any FALL in house prices will be borne 100% by the people who lend the top twenty per cent of the value of the house - if prices fall 20%, then their "deposit" is wiped out, therefore, depending on what probabilities you ascribe to prices rising or falling and if so by how much, they ought to be asking for nearly 100% of any price increases.

B. Then there is the phenomenon that an 80% mortgage costs (say) 4% interest but a 100% mortgage is (say) 7%, so the effective interest rate on that top slice of 20% is actually (say) 19% (formerly known as Higher Lending Charge). Using a £100,000 house as an example:

£80,000 x 4% = £3,200
£100,000 x 7% = £7,000
By subtraction, the top slice of £20,000 costs £3,800 interest

So we can actually split that 100%/£100,000 loan into a 4% loan for the first £80,000 and a 19% loan on the rest, i.e.
£80,000 x 4% = £3,200
£20,000 x 19% = £3,800
Total mortgage £100,000, total interest = £7,000.

C. Therefore, if you were willing to invest money in this scheme and assumed that there are equal probabilities that house prices go up, stay the same or go down, you ought to be looking for an annual interest of 19%, plus 100% of any increase in house prices, and not be fobbed off with a mere 40% of any price rises (and an unknown fraction of price falls).

For the house on which your investment is secured to cover the whole of the loan, prices would have to be rising by at least 4% a year to cover the £3,800 compound interest in the interim, which pushes the chances of this investment paying off even further into "unlikely" territory.

Another day, another few more reckless throws of the dice (41)

A couple more pathetic attempts to get money pouring back into the Great British Ponzi Scheme (from para 1.121 of HM Treasury's Budget Summary):

The Budget provides help for homeowners and new buyers, and supports the capacity of the house-building industry to ensure a more efficient housing market:

i. the Government will help homeowners facing difficulties by extending for a further year temporary changes to the Support for Mortgage Interest (SMI) scheme. The 13-week waiting period and £200,000 limit on eligible mortgage capital will now remain in force for new working age SMI claimants until January 2013;

ii. the Government will provide £250 million to support first time buyers to purchase a new-build property. The FirstBuy programme will assist over 10,000 households with equity investments jointly funded with house-builders; and

iii. the Government will strengthen demand for residential property by reforming the stamp duty land tax rules applied to bulk purchases. This will reduce a barrier to investment in residential property, promoting private rented housing supply.

Or if you want that in English:

i. Let's cut benefits for the grubby horrible unemployed people in council housing and increase benefits for lovely clean unemployed people who have "jumped on the housing ladder", even if they are hopelessly over-mortgaged! The priced-out generation won't begrudge paying a bit of extra tax to make sure they stay priced out!

ii. We looked at this one yesterday. Pointless. They need to increase the number of first time buyers by over 300,000 a year if they want to keep the house price bubble going.

And any sane or rational person would understand the words "support the capacity of the house-building industry to ensure a more efficient housing market" to mean "allow supply to rise to meet demand" but as the Lib-Cons are sticking to their guns to prevent "garden grabbing", to "preserve The Hallowed Green Belt" and reduce new home building to zero if at all possible, that is not what they mean at all. In other words, they mean precisely f- all.

iii. SDLT is, taken in isolation, a shit tax, and the new way of determining the rate is 'fairer' or at least more rational (and leads to a lower rate). But as the more detailed notes (page A112 of this) explain: "Economic impact: The reduction in the effective tax rate should stimulate demand and lead to additional transactions. Capitalisation of the tax cut may* increase the price for this type of transaction."

And isn't Home-Owner-Ism supposed to at least pretend to be about increasing the number of owner-occupiers? They appear to openly admit that it's really about helping landlords (and vendors) and protecting banks against house price falls.

* For 'may' substitute 'will'. UPDATE: if you are a fat bigot, for 'may' substitute 'might' and then for 'might' substitute 'will'.

Another day, another reckless throw of the dice (40)

When Labour were in charge, at least they had a wide, sweeping vision of how to suck money out of the productive economy and from the young, and to parcel it out to quangocrats and the already-wealthy. The Lib-Cons share these broad ideals, but instead of having the vision and courage to throw hundreds of billions at propping up banks and house prices, the Lib-Cons think they can do it for pennies:

Mr Osborne will also announce £250m to help 10,000 first-time home buyers purchase newly built flats and houses...

According to Radio 4, the scheme is a modification of schemes which local council dreamed up last week and which home builders invented years ago (see e.g. Barratts, but they were all at it), i.e. the government and homebuilder get together to lend the gullible FTB a low interest or interest free deposit of twenty per cent of the purchase price, thus taking most of the risk away from the oh-so-fragile banking sector.

Wot? Apart from being a shit idea in principle, what on earth difference is ten thousand more first time buyers (not all of whom want to buy a new build, of course) going to make? To keep the Ponzi Scheme going, the market needs at least three-quarters-of-a-million first time buyers every year, a figure which had fallen by half by 2010 and is set to fall further.

What's in it for the home builders, you may ask. Why don't they cut the price by ten per cent rather than upping it by ten per cent but then lending the buyer ten per cent of the price?

As Adam Collyer points out, there is something called a new build premium - the resale price of a new build house falls by five per cent in the first year or two, so what this does is more or less guarantee negative equity for the first time buyer.

The whole thing is so mad that sometimes you struggle to understand how thought processes are distorted in Home-Owner-Ist economics, completely different rules of logic seem to apply.

£250m divided by 10,000 = £25,000, so assuming that's the government's half-share of a twenty per cent deposit, they would cover houses up to £300,000 or more (a lot of houses are less than £250,000, of course).

Another day, another reckless throw of the dice (39)

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.

Another day, another desperate throw of the dice (38)

The Lib-Cons have been fairly slow out of the starting blocks, but they are continuing with Labour's fine work, such as encouraging a state-owned mortgage lender to grant 90% mortgages, even though this pushes it into a loss-making position.

But they have now (finally!) realised that if they use up about 3% of the extra £20 billion a year they are taking out of the economy in additional VAT and National Insurance, they can reduce people's Council Tax bills ever so slightly:

[The Morbidly Obese One] said "real help now to assist with the cost of living" was being provided.

I'm never quite sure how stupid people are, or is it genuinely the case that they don't care if the average marginal tax rate on income creeps over 50%, as long as the modest Poll Tax on houses is reduced a bit? They don't care about paying hundreds of pounds extra in taxes on economic activity as long as Council Tax is reduced by 35 pence a year?

The whole things puts me in mind of the old song by Carl Perkins:

Knock me down, step on my face,
Slander my name all over the place,
Do anything that you wanna do,
But oh, oh, honey stay off of them shoes

Yeah burn my house, steal my car
Drink my liquor from an old fruit jar
Do anything that you wanna do,
But oh, oh, honey stay off of them shoes...

Another day, another reckless throw of the dice (37)

The Tories are now getting into their stride and/or have finally discovered New Labour's manual 'How to keep a house price bubble going'. This is only the third throw on their watch and a fairly pathetic one at that, but hey:

There will be no revaluation of council tax bands in England during this Parliament, the government has pledged. It means there will be no rise in local taxes for householders based solely on the increased value of their homes.

The man who is so smug and fat it makes you sick to look at him said: "We have cancelled Labour's plans for a council tax revaluation which would have hiked up taxes on people's homes. Hefty council tax bills are a constant financial worry for many people. Today we are setting their minds at ease, and protecting the interests of the less well-off in particular who were the hardest-hit from Labour's council tax revaluation in Wales."

Nope.

Constant 'Financial worries' are things like losing your job, getting behind on debt or mortgage repayments, rocketing gas and electricity bills caused by green tomfoolery.

And as you can see he is - without a shred of evidence - playing a version of The Poor Widow Bogey - claiming that the cuddly caring Tories wouldn't do a revaluation because "the less well-off" would be hardest hit, for which there is not a shred of evidence. Funny how nobody mentions all the properties in Wales which moved down a band or two, isn't it? If they really wanted to help the 'less well-off' then what they could do is make Council Tax a teeny bit more proportional to property values, like cutting the tax in Band A by half and doubling it in Band H or something.

Another day, another reckless throw of the dice (36)

As I've suggested before (bullet point 2 on this list), one of the many things that the government can do to prop up house prices is to freeze or reduce Council Tax (current revenues approx. £26 billion per annum).

A Uncle Vince said (before he was replaced by a moron):

An unfair tax is a tax that we have to pay ourselves. A 'fair' tax is one that someone else pays. That was what I was told when I stirred up a hornets' nest last week with [the 'Mansion Tax'] proposals...

Which is another way of saying that people moan about stealth taxes, but in reality, stealth taxes are far more popular than in-your-face taxes - and don't politicians just know it!

So let's see how this works in practice:

1. The current government gleefully hiked the standard rate of VAT from 17.5% to 20%, claiming that it would increase tax receipts by about £13 billion per annum (which is a bare faced lie, once you factor in all the knock-on effects). But because of decades of brainwashing that the EU-imposed VAT is a "tax on spending" and not "a tax on production" they can get away with it, and in particular because people aren't really aware of how much VAT costs them (it's about £3,500 per household per year on average).

2. Another way of increasing tax receipts by £11 billion would have been to simply hike Council Tax by 50%, which would have practically no adverse knock-on effects, economically speaking. But that would be too in-your-face and too honest, and wouldn't have helped keep the house price bubble inflated.

3. Another Big Lie of taxation is that "council tax pays for local services", but decades of brainwashing have elevated that to "fact", so the Tories have now tapped into a seam of political-gold-but-economic-shite: they are going to allow "the hard pressed homeowner" to veto Council Tax increases.

4. FFS, at least three-quarters of the money that councils spend (or waste, depending on your point of view) comes from Whitehall out of general taxation (and redistributed Business Rates). If the Tories really wanted councils to rein in spending, all it would have to do is reduce the central grants from Whitehall.

5. Further, even if VAT were a "tax on consumption" (which it isn't) and Council Tax did pay for "local services" (which it doesn't, it pays for a small part thereof), then how on earth is Council Tax not a straight payment for "consumption of local services"?

So Council Tax is not really a tax at all, it is (or should be) a straight payment for the value (assuming that the value is equal to or greater than the cost) of "local services", which is not just street-sweeping and so on but major items of expenditure like local schools and and local hospitals (and I defy you to give me an example of a school or a hospital which isn't "local").

6. And yes, of course there's plenty of waste and corruption at council level, but it pales into insignificance compared to waste and corruption at national level or EU level.

Another day, another reckless throw of the dice (35)

We haven't had one of these since late March, then there was a bit of a hiccup (something to do with a change of government) but the new lot now appear to have found their feet* and are going full steam ahead in the same direction:

Home owners given new protection by FSA

New rules to protect struggling mortgage holders have been outlined by the Financial Services Authority (FSA). The rules seek to help people who have fallen behind on their mortgage payments, with the FSA saying they must be treated fairly by lenders. The FSA also wants to ensure all mortgage advisers have been approved as "fit and proper" persons...

Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:
- firms must not apply a monthly charge where a repayment agreement for arrears is already in place
- any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
- repossessions should always be the last resort.

In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years...

The headline is particularly sickening. The people they want to 'protect' are not really home owners in any real economic sense, they are renting money from the bank. And what's good for the 'struggling mortgage holder' is bad for the bank, and what's bad for the bank is bad for the taxpayer (seeing as the self-same banks owe the taxpayer around £300 billion, or a quarter of outstanding UK mortgages). But "it will be good for house prices", and that's the only thing that matters nowadays.

* We can't really count the Council Tax reductions as they promised they would do that in their election manifesto.

Another day, another desperate throw of the dice (34)

The government's attempts to force banks to continue lending into a falling housing market to keep the bubble inflated, by nationalising and bullying RBS and Lloyds, doesn't really seem to have worked, so they're now going to try an even more direct approach.

From The Daily Mail:

Post Offices will start offering controversial 'super-size' mortgages to help young people with little savings buy their first home, the Government will reveal today.

Under the radical plan, Britain's struggling network will hand out mortgages to people who can only afford a 10 per cent deposit. It raises fears that they will be left exposed to a negative equity nightmare if house prices fall sharply over the next few years, as some economists predict...

... under the new plans, millions of people who have not visited, or rarely visit, their Post Office will be encouraged to return by a new range of products. The radical shake-up will include a proposal to force Britain's banks to pay a new 'community levy'... The money will be used to help the Post Office and credit unions to hand out cheaper loans to people, who would typically be targeted by loan sharks...

The decision to offer 'super-size' mortgages comes just days after the Chancellor scrapped stamp duty on homes bought for up to £250,000 for first-time buyers until March 2012. For many young people, they feared they could not take advantage of the tax break because few banks would give them a mortgage.

The number of 'super-size' loans has collapsed since the credit crunch. In August 2007, there were 829 loans for those with a deposit of only 10 per cent. Today there are just 154.

Another day, another desperate throw of the dice (33)

From the BBC's Budget write-up:

Chancellor Alistair Darling has axed stamp duty on house sales under £250,000 for first-time buyers paid for by a rise in duty on homes over £1m... the planned cut in stamp duty would stay in place whoever wins the election, as it is similar to existing Tory policy.

So this all to help the 'first-time buyer', is it? Doesn't that pre-suppose that sellers won't just hike their prices by one per cent to match? (And it's a nice bit of Indian Bicycle Marketing).

Even The Daily Mail sees it that way:

Labour will be desperate to avoid signs of another collapse in house prices in the run up to the general election, expected in May, and a stamp duty cut - reported last night by the BBC - would be an ideal way of propping up the market.

I don't like Stamp Duty Land Tax, like most land or property taxes, it is almost deliberately badly designed, it's as if they were trying to bring such taxes into disrepute (a weird mixture of Poll Taxes, transaction taxes and jealousy surcharges), but the only people who'll benefit from this are people who sell up in the near future. If I were in the market for a house - oh, I am - then I'd rather wait another year or two, as prices are set to fall by considerably more than one per cent.

Another day, another reckless throw of the dice (32)

HomFrom The FT:

Britain's banks and building societies have warned that they will have to slash mortgage lending and raise rates on home loans if the government insists on prompt and full repayment of the £300bn (1) they have received in state support since 2008.

In a recent paper aimed particularly at policymakers, the Council of Mortgage Lenders set out its case for continuing government support for the Special Liquidity Scheme and the Credit Guarantee Scheme, which must be fully repaid by the ends of 2012 and 2014 respectively.

Government aid to the banking sector is a politically charged topic (2), and at a recent meeting between the CML and Treasury, the industry was told that no solution was likely before the next election. Ministers may dismiss calls for an extension of aid as self-interested industry pressure, but analysts have been flagging the issue for months, even as house prices have risen and mortgage lending picked up...

Whoo-hoo!

1) Just to put that in perspective, £300 billion is about a quarter of outstanding mortgages in the UK.

2) OT1H, the bankers are desperate for more cheap and easily available credit to enable them to keep earning their bonuses; and the government is desperate to keep the house price bubble inflated to win the Home-Owner-Ist vote; but OTOH taxpayers who actually stopped to think about it ought to be against their money being used in this way.So while a taxpaying Home-Owner-Ist may be in two minds, tenants and homeowners who do not subscribe to the Home-Owner-Ist philosophy ought to be absolutely dead against this. I wonder how it will all pan out?

3) Thinking aloud, politicians always waffle on about 'encouraging saving', and the main way of saving is spending less than you earn and leaving the money in the bank and/or paying off debts as quick as possible, until it's time to make a big purchase or retire. If these house price bubble support schemes were withdrawn, interest rates would go up on mortgages and on savings, and all things being equal, tax rates would go down.

So people would have higher disposable incomes, and they'd be more likely to leave money on deposit and/or they'd be more likely to pay off their mortgages ASAP. Remember that easy credit only encourages consumption/production in the short term - in the long run you can consume more (and hence more real things are likely to be produced) if you borrow as little as possible and save up for stuff instead, if you pay less in interest, then you've more money to spend on the good stuff.

Another day, another reckless throw of the dice (31)

From The Daily Express:

BORROWERS could be protected from losing their home if they fall behind on credit card or loan payments, under new proposals from the Ministry of Justice.

It suggested setting a minimum level of debt before a court can order the sale of a home. Under the current system, property owners unable to pay unsecured debts such as credit or store cards can have a “charging order” placed against their property to secure the debts. In a small number of cases a judge can decide the property must be sold to settle the debt.

Justice Minister Bridget Prentice said: “We know only a small proportion of charging orders results in the property being sold, so it’s rare for a debtor to lose their home because of things such as unpaid credit cards. But it’s important that the Government considers whether there is a risk that the numbers will increase due to the current economic situation. We’re asking for views on whether a minimum threshold should be introduced in law, to prevent this from occurring.”

There's been a two month gap since part 30 of this series, which looks at the measure that our government is taking to prop up the house price bubble (rather too successfully for my liking, but hey),, but that story is a corker.

It also illustrates yet again the Home-Owner-Ist* approach to classifying debt: mortgage debt is responsible and credit card debt is irresponsible; but a homeowner with unpayable credit card debt still ranks well above a non-homeowner with similar debts. And who's paying for all this? The owners of the nationalised banks, maybe?

PS, not all homeowners are Home-Owner-Ists.

Story via HPWatcher at HPC.