Monday, Jan 19, 2009
Ask a simple question ...
Institute for Economic Affairs 'Blog: Should banks be lending to house buyers?
"Should the UK government really be encouraging households to borrow money to buy houses in the current climate? And should it be encouraging banks to lend to them as part of the latest bailout package? Clearly there is considerable pent up demand for housing and this will grow over time. But a responsible government would surely be telling first-time buyers and others to put off their purchases. What is the sense in taking out a mortgage to pay for an asset that is declining in value by 15% a year? And instead of exhorting the banks to offer cheap finance so households can saddle themselves with negative equity, the government should be congratulating them for their entirely rational behaviour of limiting their exposure to the housing market".
8 Comments
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1. Crunchy said...
Should banks be lending to house buyers?
Why not try it, they take the 20% deposit and we take the loss when it does not work.
2. titaniccaptain said...
Nice find Wadsworth
What can I say..............no banks shouldnt.....there
3. thelostdecade said...
Governments are worse at allocating capital than the markets, so Brown and Darling should stop their meddling.
"Clearly there is considerable pent up demand for housing and this will grow over time".... really?!? Peter King may be talking about there being pent up demand for affordable housing – but this is very different, and is something the market is currently correcting.
4. bellwether said...
The govt are in complete double speak over this. On the one hand they tell us it was reckless lending that got us into this situation, on the other the govt are telling banks to continue to lend as before so as to support asset prices.
The most the bail outs can do is keep topping up capital adequacy until the bad debt is under control.
We are operating on a different scale, if not dimension, this time but apparently banks are always technically insolvent at this stage of the ecomomic cycle.
5. plato said...
Good Post....
I have consistently said on previous HPC bloggs that this should not be allowed. It is pure greed on behalf of the banks who have plenty of other business to get on with.
Although I would not be against them lending for 2nd properties at extortionate rates and demanding 50% deposit if they really must handle this type of business.
Building Societies did a great job and with good sense.
6. 51ck-6-51x said...
Lending should be driven by the market.
The problem was always economic greenbelts, intervention and whilst removing regulation, ignoring the need to maintain oversight and the tools of potential intervention.
Politicians fight the free-market in a bid to maintain face and keep or accumulate support.
7. jackas said...
Lending should be tied to the present value of future wealth creation.
Darling seems to have forgotten that. I hope people prudently choose not to borrow. Sigh.
8. letthemfall said...
Does pent-up demand mean people are still being encouraged to believe, or still believe that houses are always a winning investment?