Taxpayer To Make Large Losses On Help To Buy

[pjw]

See http://www.telegraph.co.uk/finance/personalfinance/houseprices/10007112/Taxpayer-risks-large-losses-over-housing-push-MPs-warn-George-Osborne.html

Addressing the taxpayer’s role as a mortgage guarantor, the Committee warned that the Government will find it “extremely difficult” to price the fee charged to participating lenders in a way that sharply cuts the risk to the Treasury.

There were also worries that the Treasury now has a “financial interest” in keeping house prices from falling, in order to limit losses to the taxpayer.

[Butthead]

Hilarious isn't it? People who work hard and pay tax have long subsidised people who don't and helped them to live in houses that the taxpayers themselves can't afford. Now prudent sensible taxpayers will also subsidise people who stupidly take on a dangerous risk.

Whatever you do under this (or any) government, don't do the right thing! :angry:

[inflating]

You really couldn't make this up. Their policies become more and more preposterous, like the plot of an Ealing comedy.

[SleepyHead]

Lets face it. Today's politicians are themselves BTLer's, and over borrowed home owners. MP expense funded house flipping proved it

They'll never get it. They can't, as it would mean admitting they were wrong for 15+ years.

They're not trying to save the economy, they're trying to save themselves. Sadly, those two aims are diametrically opposed.

[(Blizzard)]

...

They're not trying to save the economy, they're trying to save themselves. Sadly, those two aims are diametrically opposed.

Exactly.

Because the gains they are trying to protect, the business models they want to save, are the very things that destroyed the economy in the first place.

Anyway, I don't want to give anyone false hope, but the scheme could still go through without actually having any effect.

As I understand it, the government is effectively getting into the credit default swap market, selling protection on mortgages. This is only a subsidy if they deliberately mis-price the protection.

If they ever do come to their senses, then this allows them to back down without doing a u-turn.

I don't think it's likely that Cameron and Osborne will voluntarily give-up on a policy that will almost certainly achieve exactly what they want - keeping housing unaffordable for the majority of people.

However they are both quite thick, and so the pricing will probably be left up to civil servants. They might understand (or even just remember) the carnage that schemes like this can cause.

Edited April 20, 2013 by (Blizzard)

[Bruce Banner]

BBC News are running with this today......

"Taxpayers money would be lost in the event of a House Price Crash".

[eric pebble]

Hilarious isn't it? People who work hard and pay tax have long subsidised people who don't and helped them to live in houses that the taxpayers themselves can't afford. Now prudent sensible taxpayers will also subsidise people who stupidly take on a dangerous risk.

Whatever you do under this (or any) government, don't do the right thing! :angry:

100% accurate.

[Bloo Loo]

BBC News are running with this today......

"Taxpayers money would be lost in the event of a House Price Crash".

thats not even close to correct.

Taxpayers money would be lost in the event of a SUPPORTED MORTGAGE BEING IN DEFAULT.

The Asset price has nothing whatsoever to do with this until recovery.

Stupid lending will definitely result in defaults and losses.

Even sensible lending will result in some defaults...

[R K]

There were also worries that the Treasury now has a "financial interest" in keeping house prices from falling, in order to limit losses to the taxpayer.

You mean as opposed to owning the b/sheets of Royal Bank of Sh1t and Lloyds Halifax Bank of Sh1t ?

Perhaps they weren't aware of that.............

Still, so long as the Queen, Charles, Duke of Westminster et al don't lose any money on their land holdings. Let's keep focused on the big picture............

Edited April 20, 2013 by R K

[interestrateripoff]

I thought that was point, the taxpayers picking up the losses?

[Snugglybear]

The Treasury Select Committee report in its entirety is at

http://www.parliament.uk/documents/commons-committees/treasury/crc%20-%20Budget%202013%20%28HC%201063%29%20FINAL.pdf

The section on Housing starts on page 66.

Some interesting snippets from the Committee's conclusions:

"The mortgage guarantee scheme also makes the Government an active player in the mortgage market. The Committee is concerned that the Treasury now has a financial interest in maintaining house prices to limit losses to the taxpayer."

(para 159)

Professor Nickell of the Budget Responsibility Committee, as well as independent commentators, have argued that the mortgage guarantee scheme will increase demand for housing, but that existing constraints on the supply of new housing —

largely as a result of planning laws — will mean that the primary effect of easier credit, at least in the short-to-medium-term may be to raise house prices. It is by no means clear that a scheme, whose primary outcome may be to support house prices, will ultimately be in the interests of first time buyers. This is the group the Government says it wants to help.

The Committee finds the Chancellor’s assertion that increased demand for home ownership and rising prices, resulting from the mortgage guarantee scheme, will trigger a corresponding supply response, unconvincing, at least for the short term. In the longer

-term there may be an effect. This would be likely in a well-functioning market. However, the housing market contains severe supply constraints. The Government argues that new supply will be encouraged by the equity loan component of First Buy. This may be the case, but the size of the equity loan scheme, which at £3.5 billion, is dwarfed by the size of the mortgage guarantee scheme —

which will make available up to £12 billion of government guarantees, sufficient to support £130 billion of high loan-to-value mortgages. Overall, though, if the Government’s priority was housing supply, its housing measures should have concentrated there."

(paras 171 & 172)

"Both Help to Buy schemes are intended as temporary measures. The mortgage guarantee scheme will be open from January 2014 and will run for three years. The temporary nature of this scheme reflects the Government’s view that the current scarcity of high loan-

to-value lending is primarily a cyclical issue rather than a symptom of a longer-term structural change in the mortgage market. The Government has provided little analysis to support this assertion. Indeed the Council of Mortgage Lenders, who have warmly welcomed the scheme, have attributed the scarcity of such loans in part to higher capital requirements for high loan-to-value mortgages. This could well be justified by assessments of the increased riskiness of such mortgages. Our concern is that, should the current scarcity of high loan-to-value mortgages reflect structural rather than cyclical factors, the pressure for Government to extend the scheme in three years time will be immense. The unintended and unwelcome outcome could well be that a scheme designed to deal with a supposedly temporary problem in the UK housing market becomes a permanent feature of the UK housing market."

(para 175)

"The lack of clarity over whether the mortgage guarantee scheme will be open to those wishing to purchase a second home is concerning on two grounds. First, it is a reflect ion of the need to think schemes through carefully before announcing them. Second, whilst the Committee is aware of the complexity which may come with an exclusion, we struggle to see the rationale for the taxpayer to stand behind loans for people wishing to own a second property, especially given that the Chancellor has repeatedly stated that the scheme is primarily designed to help people onto the property ladder as well as those who wish to move property ."

(para 181)

The questions in para 182 are also interesting.

[plummet expert]

Hilarious isn't it? People who work hard and pay tax have long subsidised people who don't and helped them to live in houses that the taxpayers themselves can't afford. Now prudent sensible taxpayers will also subsidise people who stupidly take on a dangerous risk.

Whatever you do under this (or any) government, don't do the right thing! :angry:

It is incredible! Now we find 120% mortgages offered by Lloyds, Halifax and C & G. Has no one in govt learnt anything?! I suggest all write to your MP's at once. These mortgages are only available to current customers which means they will help the mortgaged up middle to move even higher and at the risk of the taxpayer. They should be outlawed and I thought such things were being stopped. NUTS, NUTS NUTS.

[The Masked Tulip]

What do they care if the tax-payer makes large losses? Their own properties will rise in price dramatically as house price inflation soars... and if they use Help to Buy to buy BTLs they will be laughing.

It is the Tories helping themselves and their friends again - as they always do.

[eric pebble]

The Treasury Select Committee report in its entirety is at

http://www.parliament.uk/documents/commons-committees/treasury/crc%20-%20Budget%202013%20%28HC%201063%29%20FINAL.pdf

The section on Housing starts on page 66.

Some interesting snippets from the Committee's conclusions:

"The mortgage guarantee scheme ........///...

as well as those who wish to move property ."

(para 181)

The questions in para 182 are also interesting.

A half-bright GCSE pupil could have worked all this out in precisely 5 seconds - and told the idiots who put this stupid scheme into place that it was absurd - and - above all -- UNSUSTAINABLE.

House "prices" have been rigged for years .......

It is pathetic.

[erranta]

Exactly.

Because the gains they are trying to protect, the business models they want to save, are the very things that destroyed the economy in the first place.

Anyway, I don't want to give anyone false hope, but the scheme could still go through without actually having any effect.

As I understand it, the government is effectively getting into the credit default swap market, selling protection on mortgages. This is only a subsidy if they deliberately mis-price the protection.

If they ever do come to their senses, then this allows them to back down without doing a u-turn.

I don't think it's likely that Cameron and Osborne will voluntarily give-up on a policy that will almost certainly achieve exactly what they want - keeping housing unaffordable for the majority of people.

However they are both quite thick, and so the pricing will probably be left up to civil servants. They might understand (or even just remember) the carnage that schemes like this can cause.

Khazar Crony Capitalism

When their country existed they were taxing, skimming, parasites then (just like the financial systems 'created' today)

- they never traded with produced goods, just threatened people on the trade route crossroads/VolGA with death or 10% of all goods

Edited April 20, 2013 by erranta

[sossij]

Omnishambles 2.0

[winkie]

This is not a free market this is supporting by manipulation a racket to force higher house prices....anyone who does not agree with this, they know what to do.

[Bruce Banner]

This is not a free market this is supporting by manipulation a racket to force higher house prices....anyone who does not agree with this, they know what to do.

I think it's more a case of stopping prices from falling too much until the lenders' balance sheets can stand the loss.

[MrPin]

Hooray for the "free market", wherever that was?

[winkie]

I think it's more a case of stopping prices from falling too much until the lenders' balance sheets can stand the loss.

You mean tax payers yet again pay the loss.

[Bruce Banner]

You mean tax payers yet again pay the loss.

Yes, taxpayers pay to prop up the market (short term), the alternative would be for taxpayers to pay to bail out the banks again or pay out the multitude of £85Ks, Hobson's choice. It's annoying, but Brown's legacy is toxic.

[erranta]

Yes, taxpayers pay to prop up the market (short term), the alternative would be for taxpayers to pay to bail out the banks again or pay out the multitude of £85Ks, Hobson's choice. It's annoying, but Brown's legacy is toxic.

Brown was surname of the first Ashkenaz - Jewish immigrant registered in Scotland in 1600's in E-dinburgh

(where the Brownian Traitor represents nearby)

Is there a connection between Khazar dual rulers two heads Kagan/Bek / Scottish Rite double headed Eagle.

The conquered area of the old Khaz_arian empire was in the shape of a spread-Eagle

"Within the fortress, we have found huts similar to yurts, which are characteristics of Khazar cities.... The fortress had a triangular shape and was made with bricks. It's another argument that this was no ordinary city."

Edited April 20, 2013 by erranta

[Bruce Banner]

Brown was surname of the first Ashkenaz - Jewish immigrant registered in Scotland in 1600's in E-dinburgh

(where the Brownian Traitor represents nearby)

Is there a connection between Khazar dual rulers two heads / Scottish Rite double headed Eagle.

The conquered area of the old Khaz_arian empire was in the shape of a spread-Eagle

Keep taking the pills.

[Orsino]

I think it's more a case of stopping prices from falling too much until the lenders' balance sheets can stand the loss.

Absolutely. It's also politically expedient for them to be seen to be helping homeowners too. Personally I think this government has been pretty successful at slowly deflating the housing market whilst appearing intent on doing the opposite. Maybe that gives them far too much credit.

[Bruce Banner]

Absolutely. It's also politically expedient for them to be seen to be helping homeowners too. Personally I think this government has been pretty successful at slowly deflating the housing market whilst appearing intent on doing the opposite. Maybe that gives them far too much credit.

My thoughts exactly.