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Help To Buy Mortgages Could Damage Uk Economy, Warns Ratings Agency

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http://www.theguardian.com/money/2013/aug/06/help-to-buy-mortgages-economy-fitch-ratings

Fitch Ratings has become the latest critic of the government's Help to Buy housing scheme, arguing it is likely to boost profits for builders and banks but damage the UK economy.

The ratings agency said the second phase of the scheme – which will see the government guarantee mortgages on homes bought for up to £600,000 from January next year – would probably push up prices and increase taxpayer liabilities without helping to alleviate Britain's chronic housing shortage.

Isn't that the main idea to boost profits of banks?

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Increase tax payer liabilities. That suggests to me that the rating agencies think the guarantees will have to be used. Though i can't remember exactly how the scheme operates! ( the hierarchy for losses)

Edited by Ash4781

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The main idea is to simply keep the boat afloat for a while longer by patching it up with more debt. Debt's the only game left in town. It's not a long game, mind you, given the lack of real primary economic growth on the horizon. But, then, the time horizon of our booms and bust are getting shorter with each sucessive cycle and so the "long view" taken by our leaders is getting comensurately shorter also.

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Help to buy contradicts every principle the Tory party have ever stood for- everything Thatcher claimed to be opposed to- the socialisation of individual risk and the use of taxpayer funding to rig market outcomes.

Entire regions of the UK were laid waste in order to preserve the principle that the state should not distort the free market by subsidizing market prices. A generation of industrial workers were tossed aside like trash in support of this grand principle.

And yet here they are doing that very thing- using taxpayer money to distort the market price of houses. So while their 'principles' prevented them from saving the coal and steel industries- those same 'principles' are quickly abandoned in order to preserve the 'value' of an asset class that is grotesquely overpriced and will inevitably fall- leaving those their scheme has 'helped to buy' drowning in debt.

No matter how low my opinion of these jokers gets they always manage to surprise to the downside.

Edited by wonderpup

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Help to buy contradicts every principle the Tory party have ever stood for- everything Thatcher claimed to be opposed to- the socialisation of individual risk and the use of taxpayer funding to rig market outcomes.

Entire regions of the UK were laid waste in order to preserve the principle that the state should not distort the free market by subsidizing market prices. A generation of industrial workers were tossed aside like trash in support of this grand principle.

And yet here they are doing that very thing- using taxpayer money to distort the market price of houses. So while their 'principles' prevented them from saving the coal and steel industries- those same 'principles' are quickly abandoned in order to preserve the 'value' of an asset class that is grotesquely overpriced and will inevitably fall- leaving those their scheme has 'helped to buy' drowning in debt.

No matter how low my opinion of these jokers gets they always manage to surprise to the downside.

+1 Brilliant post.

The conservatives have shown themselves to be total hypocrites. (likewise with Labour on the other side of the coin)

No bailouts for the car/steel/coal industries, yet HUGE mind blowing bailouts for the banking industry and reckless borrowers.

The Conservatives (and Labour) have killed their own parties. I believe we will see this at the next election.

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Anyone who makes use of HTB needs their head testing if a commercial lender will only provide you a 75% loan to purchase the house.

Likewise anyone not using HTB and also failing to negotiate a minimum of 25% off the price.

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Help to buy contradicts every principle the Tory party have ever stood for- everything Thatcher claimed to be opposed to- the socialisation of individual risk and the use of taxpayer funding to rig market outcomes.

Entire regions of the UK were laid waste in order to preserve the principle that the state should not distort the free market by subsidizing market prices. A generation of industrial workers were tossed aside like trash in support of this grand principle.

And yet here they are doing that very thing- using taxpayer money to distort the market price of houses. So while their 'principles' prevented them from saving the coal and steel industries- those same 'principles' are quickly abandoned in order to preserve the 'value' of an asset class that is grotesquely overpriced and will inevitably fall- leaving those their scheme has 'helped to buy' drowning in debt.

No matter how low my opinion of these jokers gets they always manage to surprise to the downside.

While I broadly concur with your assessment of the Thatcherite/monetarist wing of the Tory party, wp, it's worth pointing out that

1. We have a Coalition govt.

2. The Tory party saved Rolls Royce and once had a very different attitude to state intervention and trade unionism.

3. While preaching the rhetoric of austerity Osborne has been practicing a policy of Keynesian re-inflation. OK, he's cut at times where he should have spent, and spent where he should have cut but the net effect has been a quite unprecedented peace-time increase in govt spending that's held up aggregate demand and thus employment. House prices too, of course, but then there's a downside to everything.

None of which excuses FLS and HTB in any way, but do you really think Labour would have acted differently had they won in 2010, up to and including a pre-election giveaway for its core vote?

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Increase tax payer liabilities. That suggests to me that the rating agencies think the guarantees will have to be used. Though i can't remember exactly how the scheme operates! ( the hierarchy for losses)

This is the key point. Help2Buy just brings forward British sovereign debts very own 'Greek style day of reckoning moment'.

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Piece on Telegraph website about Carney's guidance on rates, but contained within it is a few lines about HTB and the first instance of a commentator saying that part 2 of HTB should be cancelled if prices keep rising. Can't easily post on my smartphone, it's easy to find though.

Edit link, comments from Howard Archer:

http://www.telegraph.co.uk/finance/mark-carney/10226828/Bank-of-England-Governor-Mark-Carney-to-unveil-new-interest-rate-promise.html

Edited by cheeznbreed

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1. We have a Coalition govt.

:lol: Yes that's right- they used to be the Lib Dems. I remember them when they were vertebrates.

It's amazing how proximity to power erodes moral integrity- look at what they have become....no-look a little lower-down there on the floor- that's right- that compliant blob of goo- that'll be the Lib Dems.

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Help to buy contradicts every principle the Tory party have ever stood for- everything Thatcher claimed to be opposed to- the socialisation of individual risk and the use of taxpayer funding to rig market outcomes.

Entire regions of the UK were laid waste in order to preserve the principle that the state should not distort the free market by subsidizing market prices. A generation of industrial workers were tossed aside like trash in support of this grand principle.

And yet here they are doing that very thing- using taxpayer money to distort the market price of houses. So while their 'principles' prevented them from saving the coal and steel industries- those same 'principles' are quickly abandoned in order to preserve the 'value' of an asset class that is grotesquely overpriced and will inevitably fall- leaving those their scheme has 'helped to buy' drowning in debt.

No matter how low my opinion of these jokers gets they always manage to surprise to the downside.

Agree fully with the point about principles and the parallel you draw, but the "workers were tossed aside" bit is perhaps a little overdone. The miners had to be defeated and like the dockworkers, they rather destroyed their own industries in their bloody-minded pursuit of self-interest versus that of the rest of the country.

This time it's the government/banking cartel looking to destroy the currency in their bloody-minded pursuit of self-interest versus that of the rest of the country.

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Help to buy contradicts every principle the Tory party have ever stood for- everything Thatcher claimed to be opposed to- the socialisation of individual risk and the use of taxpayer funding to rig market outcomes.

Entire regions of the UK were laid waste in order to preserve the principle that the state should not distort the free market by subsidizing market prices. A generation of industrial workers were tossed aside like trash in support of this grand principle.

And yet here they are doing that very thing- using taxpayer money to distort the market price of houses. So while their 'principles' prevented them from saving the coal and steel industries- those same 'principles' are quickly abandoned in order to preserve the 'value' of an asset class that is grotesquely overpriced and will inevitably fall- leaving those their scheme has 'helped to buy' drowning in debt.

No matter how low my opinion of these jokers gets they always manage to surprise to the downside.

+1

The only principle the "Tories" had was to get elected at any cost and the other lot are just as bad a "faux working mans party."

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The main idea is to simply keep the boat afloat for a while longer by patching it up with more debt. Debt's the only game left in town. It's not a long game, mind you, given the lack of real primary economic growth on the horizon. But, then, the time horizon of our booms and bust are getting shorter with each sucessive cycle and so the "long view" taken by our leaders is getting comensurately shorter also.

Yeah. They only want to create the idea of a boom now and hold it together till the election. HPCers only slightly more peeved than labour now.

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Help to buy contradicts every principle the Tory party have ever stood for- everything Thatcher claimed to be opposed to- the socialisation of individual risk and the use of taxpayer funding to rig market outcomes.

Entire regions of the UK were laid waste in order to preserve the principle that the state should not distort the free market by subsidizing market prices. A generation of industrial workers were tossed aside like trash in support of this grand principle.

Oh please stop your making me all gooey eyed with nostalgia.

And yet here they are doing that very thing- using taxpayer money to distort the market price of houses. So while their 'principles' prevented them from saving the coal and steel industries- those same 'principles' are quickly abandoned in order to preserve the 'value' of an asset class that is grotesquely overpriced and will inevitably fall- leaving those their scheme has 'helped to buy' drowning in debt.

No matter how low my opinion of these jokers gets they always manage to surprise to the downside.

Labour demonstrated that the optimal strategy for winning elections in a modern so-called "democracy" is to steal from half the population and give it to the other half - voila, instant HOC majority in the bag. Works a treat since the victim half will just take it up the jacksey without doing anything about it.

The tories are just adapting and refining the same approach.

Edited by goldbug9999

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Labour demonstrated that the optimal strategy for winning elections in a modern so-called "democracy" is to steal from half the population and give it to the other half - voila, instant HOC majority in the bag. Works a treat since the victim half will just take it up the jacksey without doing anything about it.

The tories are just adapting and refining the same approach.

The money being borrowed to fund Help to Buy has not been stolen from labor party supporters- it's being stolen from the middle class who will be paying the taxes required to make good on the mortgage guarantee when Help to Buy blows up. So it's mainly those who vote Tory who will be taking the hit for this one- they just haven't figured this out yet.

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