The Council of Mortgage Lenders' shroud waving before the Comprehensive Spending Review was quite professionally done, wailing on about 'hard pressed buyers suffering during the recession', subtext: ensure that money keeps rolling in and that the banks' collateral doesn't fall in value.
The government was only too keen to continue with the other Home-Owner-Ist policy of transferring money from tax payers to 'hard pressed buyers' and hence to the banks and building societies, but methinks that the CML are getting a bit over confident. Instead of just thanking them politely, they have started making veiled threats:
The Council of Mortgage Lenders welcomes the extension of the temporary concession on support for mortgage interest announced today under the government's comprehensive spending review.
The £200,000 limit on mortgage size and the 13 week waiting period (down from 39 weeks) will now remain in place until January 2012. The CML trusts that the government will review the housing market conditions before that point and decide on whether further continuation would be appropriate.
Epic Fail.
They should have said 'jobs market conditions' or something. The official lie is that handing out money to reckless overstretched hard pressed borrowers is about helping the borrowers from preventing the 'spectre of repossession'; and not about propping up house prices and bailing out banks.
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5 comments:
I thought an important part of the economic recovery was to make toxic debt good again. This means shoring up mortgage debt.
EK, income tax takes money out of the economy. Land rents, high house prices and mortgage repayments take money out of the economy.
So increasing taxes on income and enterprise to 'shore up' i.e. repay and guarantee mortgage debts leads to Home-Owner-Ist death spiral.
Yes.
But interest rates remain stupidly low. Paradoxically, high house prices put money back in the economy too(albeit funny money.) The theory goes that so long as people see a measurable increase in equity they will feel confident about spending and taking on personal debt. This manifests itself as high street spending which is where much of our employment is.
I'm not saying that this is not wrong. In fact I think it is. But the Government is trying hard to preserve property values and protect the banks and consumer confidence whilst ballancing the need to reduce the deficit through cuts and taxes.
We've had one administration after another tasked with the job of increasing living standards based on diminishing economic output.
How else but to cultivate a reliance on debt ? And how else to do this but encourage a false market ?
What other market than housing ?
Doubtless the bubble will burst, but the most powerful people in the land are motivated to stop it from happening.
EK, that is an excellent summary. Spot on. The irony is that 'the most powerful' are 'the most powerful' merely because there is a bubble.
It's like the members of the Politburo were 'the most powerful' because they tricked people into believing that Communism would reign eternal. It didn't and they aren't any longer.
Yup.
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