Friday, Aug 15, 2008
Desperate times in the housing market call for desperate measures
FT: Councils push to become mortgage lenders
The New Local Government Network (NLGN) is lobbying support from local councils in a bid to persuade the government to allow councils to offer mortgages to those struggling under the credit crunch. NLGN has been campaigning for local authorities to be able to offer financial support to those affected by the credit crunch. It hopes this would stave off repossessions and evictions, prop up the housing market to prevent remortgage difficulties and support first-time buyers to buy locally. Currently, the NLGN is gathering signatures to a letter from council leaders calling for the government to support local authority mortgages. (See letter attached.)
Posted by jack c @ 10:41 AM (1326 views) Add Comment
37 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. mark said...
local council goes bust after lending to subprime idiots..... you can just see the headlines now
2. paul said...
Not gonna happen.
3. waitingfor hpc said...
do i pay council tax for this load of idiots???????
4. last_days_of_disco said...
Well, you had to ask: "Do i pay council tax for this load of idiots?"
Time to get involved in your local council.
5. Drj said...
In prinicpal it's a good idea - that's how we bought our first flat in 1979. The interest rate was good and the cost of purchase was low but they need to keep the earning multiple low. I think we borrowed 1X my wife's salary (I was still ay University) and we had a 12.5% deposit.
6. mark wadsworth said...
I could do a detailed explanation of why this is the stupidest idea I have heard for ages, or I could just put my hands over my ears and run out into the street screaming "AAAAAAAAAAAAARRRRRRRRRRRRGGGGGGGHHHH!!!!!!!!"
7. Sneaker said...
Are councils going to start offering 10x joint earnings interest-only 125% mortgages?
This is total insanity - old style socialist intervention, trying to prop up a market than needs to correct. It's like New Labour never happened.
Let the market correct and find its own level. Then we can get back to good old-fashioned 2-3x single-income mortages, with 10-20% deposits, and housing will never be a problem again.
The problem was the inflated multiples. Never let them come back.
8. wiltshire said...
What will happen is in about 5 years time billions upon billions will have been wasted and new laws written and town centres boarded up and riots and what have you and the concensus from the 'enlightened ones' will be 'Well what we should have done was let the housing market find it's own level naturally. All our attempts to keep it alive did more harm than good and a long overdue correction/crash which would have occurred anyway did."
9. Papabear said...
How did we get to a point where a mortgage (i.e. a loan) is considered a birthright!? A mortgage is something you should get, at a bank's discretion, if you meet certain (stringent) criteria: a decent deposit and proof that you are able to repay the loan.
10. nooneo said...
Everyday we hear more bizare, ridiculous and absolutely insane stories...
The trouble is when this dying guv'mint decides to implement some of them !
11. renting2 said...
Crass stupidity of monumental proportions!
12. last_days_of_disco said...
"Under the scheme, councils would be able to borrow money under prudential borrowing rules and offer support to a select group of people, such as first-time buyers or people involved in mortgage difficulties, particularly when numbers of mortgage defaults might impact disproportionately on social housing demand in the area."
As long as you throw in the word *prudential* its got to good guys. What are you worrying about. ;-)
13. last_days_of_disco said...
errata = " ... got to good ... " should be " ... got to be good ... "
14. japanese uncle said...
The loss resulting from the collapse of the housing bubble must be payable by the parties who squeezed billions out of it in the first place, rather than the general public. Retroactive extra capital gain tax on property (and maybe oil futures as well, why not?), let alone income (commission, salaries and bonuses) made out of the sales of toxic derivatives, charging additional 50% must be introduced. This will make a nice pool of funds deep enough to cover the bad debt losses.
15. Stevie Dee said...
Do you get a disocunt on yor "Council Tax" too?
16. nooneo said...
Again this just looks like a country (or politicians) that have completely run out of ideas.
I'm with you Japanese Uncle, "the housing bubble must be payable by the parties who squeezed billions out of it in the first place"
You, like me, cannot understand how one can make millions from property and not pay tax on it? No wonder we have property bubbles, how on earth would some of these people/companies make their milloins?
Madness - Just remember the thatcherite mantra - The meek shall inherit sh!t !
17. techieman said...
JU - so are you going to give extra CGT relief for those people who lost money on oil futures? Why stop there? Why not extend to all futures and all hedges across all commodities. So if i bought some futures to hedge and made money on those but lost on the underlying then .....? Also arent the same people that have the bad debt losses the people you are trying to levy a higher tax on - well i suppose you can differentiate between bank employees and owners / shareholders?
As for the councils they in the past got involved in swaps and got their fingers burnt, and i think the banks ended up suffering the losses because the authorites were contracting ultra vires (although it was a few years ago).
18. Stevie Dee said...
Self Interest.. God if Adam Smith was alive today.. one could imagine that he would be laughing up his kilt. Well, he would like Greenspan, approach the situation in a more reserved fashion, empirically observing the euphoria created. Guys, face it, the council could organise a piss up, let alone mortgages.. relax.. the stick is brown.. and it is merely being stirred.
19. Chilli said...
The guys who thought this up would obviously belong to the same camp as the crowd who thought property could go up forever. Both arguments have the same level of respect for 'a balance' in the free market.
There is nothing they can do to keep this market up short of creating an artificial shortage of housing, perhaps by restricting growth via planning permission and forcing us all to pay exorbitant rent for rooms instead of whole apartments... errr hang on a minute....
What this country really needs is to encourage enterprises that have suffered in the past due to 'greater profits' presented by the supposed boom in property. Printing more money is not the answer. it might save a few sufferers right a the bottom, but we have the dole for these people. They are not entitled to a house.
20. harold said...
The socialization of private debt is the corollary of the taxation of private profit. Unless criminal activity is involved, such a fraud, neither is a good idea.
21. mark wadsworth said...
JU, I don't believe in retrospective taxation, but going forward, all this can be achieved relatively painlessly with Land Value Tax.
22. Stevie Dee said...
Maybe the first hint of Nationalisation of the Housing Stock? Landlords Beware?
23. last_days_of_disco said...
@nooeneo
We get it, you hate Thatcher and you characterize anyone you disagree with as a Thatcherite.
Yeah, is the great Labour paradise not quite working out the way you hoped, are you going to blub like Vaughn did?
Please, its pathetic to bring up Thatcher at this point. Labour did this, they have blown it all by themselves.
Blaming Thatcher is *so* yesterday. Crash Gordon did this, your ex-hero (I imagine). I know its tough to come
to terms with but please don't vent on someone like Thatcher, it just makes you look sad.
Try and focus on the reality. The socialists will always try to destroy the middle class (bourgeoisie),
and yes I have a Lenin quote or two for you:
“The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.” - Lenin
“The goal of socialism is communism.” - Lenin
This is what is happening in the world. Not very complicated to spot really.
24. layers said...
@21 lastdays - different sides of the same coin. Could Vince Cable (too close cabal for my liking ;-) make a difference? Well if he could, then he wouldn't be allowed.
Revolution? we're too apathetic for that and will probably get arrested, so I agree with your first post that to make a difference, we need to get involved. Join our local councils in some capacity and maybe even become a voice. LBHF will be hearing from me.
25. japanese uncle said...
techieman
I must take your point.
As for the council officials who deliberately or naively commit the tax payers money to those fraud schemes must be held accountable in the court of law, or subject to some kind of civil impeachment process (not sure if there is any relavant law applicable to council officials).
mark wadsworth
Land value tax is basically a good idea, but there must be a few qualifications. It should be applicable to a plot in excess of certain threshold, and also should be something that specifically penalizes buy-to-let properties.
26. mark wadsworth said...
JU, thanks, but I've gone off the idea of 'a certain threshold' (having debated this to death with the Labour Land Campaign - we were half for and half against), I think it is better to 'overcollect' the tax and dish some of it out as a universal benefit (or use it to cut other taxes etc). And would your 'exempt amount' be in terms of area or in terms of value? And would it per person, per adult or per household? What about tenants - would they claim their exempt amount against the landlord's bill? What about a married couple with a second home - would they be able to claim two allowances or just one? Etc etc, administratively it would be a nightmare, as well as having unintended consequences.
Further, it is inevitable that BTLers will pay more - they would pay the LVT on notional income and notional capital gains AS WELL AS income tax on actual profits. There is no need to penalise them above and beyond that.
27. bystander said...
Drj said @."that's how we bought our first flat in 1979.......I think we borrowed 1X my wife's salary (I was still ay University) and we had a 12.5% deposit."
........please let them pass this, if councils have to lend at this level of income multiples the average house will need to come down to 24K or worst case scenario 2X income 48K. YES PLEASE..........but do they really think this is a vote winner. If on the other hand they go with the current vastly overinflated prices of between 6 and 9X salary for an average home then expect inflation on council tax/ traffic related fines etc to increase by between 600 and 900% to cover this ludicrous plan. They can't even pay their refuse collectors, how the hell will they finance this.
28. tyrellcorporation said...
I'm sure the banking lobby will have something to say about being undercut by the state. This'll never happen IMHO.
29. nooneo said...
21. last_days_of_disco @ 21
For you info. Yes I hate Thatcherism. Free markets are a phallusy. Thatcher was another extreme politician that pragmatically attempted to shape our world to an american brand of capitilism. No welfare state, no state aid. She personified the property owning democracy and look at the mess we are in. She hated councils and council house tenants. and no I don't think everyone who disagrees with me is a Thatcherite, that is both a trite and patronising comment.
I also hate what the socialists have done to this country. The nationalised everything. Wasted good industries and w@nked away a huge amount of wealth.
I neither voted for Broon of Bliar and would never do so. British politics has almost always sucked. Since the second world war we have had one form of extreme politics after another. Socialism and crass captilism. Bosses , workers , unions, poll tax, benefit systems and property booms. What a friigin waste. Now we have little industry and a service industry in tatters.
I don't see politics as a 2 way street, perjhaps you do. If I hate thatcher it's not becasue I'm a socialist. If I hate socialism it's not becasue I think the free market is a valid capitalist model. Perhaps you voted for thatcher and want to return to her fascist ways. I personally will NEVER vote again unless I vote for a party supporting Proportional representation or we indeed have PR !
30. japanese uncle said...
mark wadsworth
I am not informed enough to go into detail in this concept, but it should be operated under the philosophy of wealth tax, meaning such threshold should be calculated on the basis of means testing, though it should to a degree be biased against the excessive property investment.
31. techieman said...
nooneo in this case is on the money. We are where we are because of a combination of thatcherism and nu labour. Thaterism because she deregulated the banking system along with Ronnie BUT at least she kept an eye on the money supply and Labour because they didnt keep an eye on the money supply. So who do you vote for? Well for me none of the parties deserve my support.
Taking the economics to one side - there are of course other reasons why you might vote for a political party.......for example you may think one party is more honourable than the other ....but to be honest what % of the population votes for humanitarian reasons? Perhaps its me but my perception is we all vote for the party that will do best for us. From my POV the only trouble is there isnt on that basis a positive reason for voting!
JU - fair enough, I normally find your posts very good but i just thought this one was a bit vindictive without a really good argument backing it up. By the way where is Uncle Tom?
32. Jungli said...
"Under the scheme, councils would be able to borrow money under prudential borrowing rules and offer support to a select group of people, such as first-time buyers or people involved in mortgage difficulties, particularly when numbers of mortgage defaults might impact disproportionately on social housing demand in the area."
That is New Lie-bour voters then... ?
33. nooneo said...
techieman @ 31...
My point is that we have both been let down by right wing and left wing politics.
Our wonderful labour politicians (and I'm talking about most of the last 60 years) have both started an unbalanced benefit system (funded by national insurance - simply a tax on the lower 2/3rds of us) and allowed an 'underclass' to develop over 40 years. They nationalised perfectly sound industries 'for the national good' and preceeded to make them so inefficient and driven by union domination they nearly banckrupted the economy.
Thatcherism tried to counter the mess that the socialists had left but neglected to see any good in any of the things they did. The have sold off a huge chunk of our social housing and undermined the property market. The tried to undermine the NHS and they made our society even more divided (divide and rule) than ever. They sold almost all of the nationalised industries (even things like water which was absolutley pointless - there's a perfect example of a non free market) and didn't protect the nation against dodgy business practices (There ain't going to be 35% increases in energy prices in France!). The even tried to introduce a tax on being alive (the poll tax). They derugulated, even more, the property and banking markets because they wanted to counter the 80s/90s crash!
Then NuLabour came along and tried to build on the Thatcherite dream. They relied on the (derugulated) housing/finance market to drive the economy, which it has done, up until they made the massive property/credit/debt bubble and of course there had to be a catylist for the crash and the sub-prime market in America pulled the trigger. The lie that is NuLabour is that there is very little NEW about them at all. They are either socialist dogma, or socialist dogma within a thatcherite framework!
Left/right/left/right - It's like a bleedin yoyo. It's obvious we need the NHS (or something similar). We need private industry (naff all gets done by committee). We need public transport/social housing and a benefit system (but don't create a system where generations can't get work/don't want to work!). It's not rocket science.
A simplistic view but I think there is some relevance here. When Bliar talked about the 'third way' what he was actually trying to describe was exactly what we should have had under any system of propertional representation where party politics/political rhetoric/dogme was swept away by the thought that any balanced government would have had to find policies that were effectual over the long term, rather than justy the length of time to the next 'first past the post' election fiasco !
34. quiet guy said...
@nooneo
"Free markets are a phallusy."
I don't want to get into a spelling fascist things but that was funny!
http://www.merriam-webster.com/dictionary/phallus
http://www.merriam-webster.com/dictionary/fallacy
BTW, for what its worth, I think tighter regulation of banking, at the very least, is required. The bankers had their chance to shine after Thatcher's deregulation of the banking system and they blew it.
35. nooneo said...
quiet guy..
spelling was deliberate me dear.
Oh, how I love this site.
36. Shipbuilder said...
23. last_days_of_disco said...
"@nooeneo
We get it, you hate Thatcher and you characterize anyone you disagree with as a Thatcherite.
Yeah, is the great Labour paradise not quite working out the way you hoped, are you going to blub like Vaughn did?
Please, its pathetic to bring up Thatcher at this point. Labour did this, they have blown it all by themselves.
Blaming Thatcher is *so* yesterday. Crash Gordon did this, your ex-hero (I imagine). I know its tough to come
to terms with but please don't vent on someone like Thatcher, it just makes you look sad."
We get it, last_days, you hate socialism and you characterize everyone you disagree with as a socialist.
Unfortunately the world is more complicated than the simplistic nonsense of left/right.
"Left/right/left/right - It's like a bleedin yoyo. It's obvious we need the NHS (or something similar). We need private industry (naff all gets done by committee). We need public transport/social housing and a benefit system (but don't create a system where generations can't get work/don't want to work!). It's not rocket science."
Spot on, nooneo.
37. quiet guy said...
@nooneo
Sorry. Your humour is very dry today (and wicked). I suppose we have a new school of economics now :)