Thursday, August 21, 2008

This should not be happening

Council leaders call for power to offer mortgages

Council chiefs have called for extra powers to allow them to offer mortgages in an attempt to rescue the housing market. In a letter published in today's Times, they argue that the public sector should be able to help first-time buyers and those unable to secure a home loan. Caroline Flint, the Housing Minister, is said to be sympathetic to it but Treasury ministers are less so.

Posted by little professor @ 01:39 AM (2454 views)
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30 thoughts on “This should not be happening

  • anyone with a brain cell is .. “less so.”

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  • little professor says:

    That letter in full:

    Sir, The credit crunch could have a serious impact in local communities across the country. Evaporating mortgage availability may place hard-fought regeneration in jeopardy unless rapid action is taken. With inter-bank lending at a standstill, we believe that there is a pragmatic need for the local public sector to step in and offer much needed new mortgage capacity.

    Preventing a precipitous collapse in the housing market and restoring stability is in everyone’s best interests. In 1980, 600,000 mortgages with homeowners were held by local authorities. Since then, the banking industry has almost universally taken on this role. Today we need a more balanced approach, involving both private and public sectors offering mortgage finance.

    The public purse should not just be used to mop up the problems caused by banking difficulties. The Government should recognise that councils are well placed to take a judicious share of mortgage business — an opportunity that could yield a surplus for the council tax payer.

    We call on the Government to urgently consider three reforms. First, legislation should allow councils to offer targeted deals to the public and the provisions specifying a blanket “standard national interest rate” for council mortgages should be reformed. Secondly, the Government should ask the Public Works Loans Board actively to encourage councils to revive their public banking functions. Thirdly, the Chancellor should set aside public borrowing capacity for council mortgage provision and frame new guidelines in conjunction with local authorities.

    Councils are already supporting much needed community facilities, including rescuing local post offices from closure and investing in the retail and transport infrastructure. Allowing local government to carefully intervene and support homeowners is a sensible step which we urge ministers to consider seriously.

    Cllr Sir Richard Leese
    Leader, Manchester City Council
    Cllr Helen Holland
    Leader, Bristol City Council
    Cllr Gerald Vernon-Jackson
    Leader, Portsmouth City Council
    Cllr Steve Reed
    Leader, London Borough of Lambeth
    Jules Pipe
    Mayor, London Borough of Hackney
    Cllr Jamie Carswell
    Lead Member for Housing, London Councils
    Chris Leslie
    Director, New Local Government Network

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  • silly s*ds….

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  • japanese uncle says:

    Councils that are not even capable of weekly rubbish collection should offer mortgages?! These people need to consider brain transplantation seriously.

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  • Caroline Flint, the Housing Minister, is said to be sympathetic…

    What a surprise.

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  • mark wadsworth says:

    It was a shit idea a week ago (or whenever we last discussed it) and it’s still a shit idea now.

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  • I wonder if this £2bn subsidy bid is just the beginning – an attempt to set a precedent. It going to be a little awkward for the government to say no on grounds of risk to taxpayers money after they placed tens of billions of pounds of centrally collected tax at risk by nationalising NR. At last, we are getting true socialist government policy! 🙁

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  • it_is_going_with_a_bang says:

    No thanks. The bl**dy councils can stop offering all these dam services they were not intended for and keep their running costs and pensions DOWN.
    Councils are not well placed to do any such thing.

    What a load of self interested bull**it.

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  • Bricor Mortis says:

    like it or not, I think a beleagured government could be tempted go for this.

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  • honest valuer says:

    Do they need any valuers because I’ve certainly got spare capacity.

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  • Are these individuals BTLers or have friends in this market?

    Cllr Sir Richard Leese
    Leader, Manchester City Council
    Cllr Helen Holland
    Leader, Bristol City Council
    Cllr Gerald Vernon-Jackson
    Leader, Portsmouth City Council
    Cllr Steve Reed
    Leader, London Borough of Lambeth
    Jules Pipe
    Mayor, London Borough of Hackney
    Cllr Jamie Carswell
    Lead Member for Housing, London Councils
    Chris Leslie
    Director, New Local Government Network

    If so, a massive “conflict of interest”. The mortgage approach has failed, the current situation is highlighting what a crock the whole thing has been. What the hell are these bafoons thinking. They get a government pension anyway, paid by the taxpayer on top of their high pay, provided by the taxpayer. The gravy boat is now empty. The market will crash and the government can come in and buy the stock, simple as, members of staff in councils all over the United Kingdom, have been involved in this corrupt market, equally guilty and complicit in the exercise of pushing up market prices. As well as highlighted in the past, dodgy estate agents, builders, lawyers, surveyors, banks. This is a great illustration how this PPP is fundamentally flawed. People are greedy (self interest) when given the opportunity, and when these individuals become a collective of shared interest, the current malaise demonstrates how dangerous such a collective is to the well-being and fabric of our society. Napoleon once remarked “that Britain was a nation of shopkeepers”. Today “Britain is a nation of property speculators”.

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  • Private profit; public pain. No wonder people don’t like the state.

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  • This is nothing but insanity. I bet those councillors all have a nice big real estate portfolio that they want to maintain.

    Like the guy said above “if they can’t even collect the rubbish” how do they think that they will be able to do mortgages?!?! And who will pay when it all goes tits up? Not shareholders who voluntarily risked capital to get capital ganis, but compulsorily taxed rate payers who had no say in this insanity.

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  • All those publicly funded mortgage advisors plus the scope for fraud and corruption between councils, lawyers, valuers, builders developers (ten times worse than what occurs at present). Makes the mind boggle, no wonder they are so keen!
    They can then open a banking division with credit cards, loans, insurance. Allows them to keep an eye on the residents’ financial position and extract council tax at source as well as fines etc. Marvellous!
    They’ll be well set up to make and misspend a mint in the next upturn.
    They’ve got to get the thin end of the wedge accepted first of course.
    Am I paranoid and going OTT??

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  • If local councils were given more responsibility perhaps they would rise to the challenge? Local G has a lot more power across a lot of the continent and seem to make a fair fist of it. Or are people saying that we are genetically inferior to continental europeans? If you think that private sector finance operates responsibly you are living in another galaxy, not just another planet.

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  • It is a great idea. It is practical and feasible. And all the councils have to do is issuing one parking penalty ticket per person, including non drivers, children, infants and pets.

    £30 ticket x 66 Million population (58 million people and 8 million pets), that’s how you get £2 billion. Ok, Ok, I know the total value wiped off the UK property market is approaching £400 billion. So what! That means we only need another 199 tickets per person/pet to shore up the balance. I am sure we can afford it.

    Oh, and no, it is not stealth tax; and no, the councils are not profiting from it.

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  • ‘Preventing a precipitous collapse in the housing market and restoring stability is in everyone’s best interests’

    Bullsh*t

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  • I wonder how many of the cllrs that signed the letter have BTL investments? After all if they wanted regeneration etc etc the best starting point would be affordable prices. All they have to do is write a highly publicised letter pointing out the benefits of 50% price reductions, and hey presto affordability would no longer be an issue.

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  • Time to add your comments to the Times article? Only 5 on there so far.

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  • This isn’t an attempt to prop up the market. It’s an attempt to remove money generation capabilities from banks and return them to public control. The local authorities will *have* to have very strict lending criteria – they won’t be able to leverage money loaned from other banks, as the banks have done which has fuelled the credit explosion. It’s another attempt to set up a public credit line as advocated by the Forum for Stable Currencies.

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  • Central and local government must not intervene to ‘rescue’ the housing market. The best help for first time buyers (and many others) is to allow the market to fall to its natural level – any attempt by government to artificially maintain property prices at high multiples of average earnings is disgraceful.

    The government should be giving an honest appraisal of the economic situation and not attempting to give people false hope that it can provide a ‘silver bullet’ to kick start the property market – and everything will once again be alright. The public need to understand the true reality of the ‘credit crunch’ and then be able to make informed decisions about their personal financial situation.

    Perhaps GB&AD should take the advice of the debt counsellors and face up to the reality of the UK’s financial position – this might be a good first step, rather than pretend the problems do not exist – ie ‘its the global economy’.

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  • The problem we have is that house prices are unsustainably high versus our salaries. So now make taxpayer backed money available for mortgages to artificially maintain this unsustainable situation? Crazy idea, think again.

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  • There simply isn’t the money available to give to the councils to lend out.

    If councils want to do this, first they should try persuading savers to deposit cash. If individual savers don’t trust the council then why should central government?

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  • 15. Nickb said…
    If local councils were given more responsibility perhaps they would rise to the challenge? Local G has a lot more power across a lot of the continent and seem to make a fair fist of it. Or are people saying that we are genetically inferior to continental europeans? If you think that private sector finance operates responsibly you are living in another galaxy, not just another planet.

    Nobody thinks that the private finance sector has operated responsibly, but what you seem to be suggesting is that because they messed up, it is now the turn of the council to muck up as well. Then who gets to muck up next? The neighbours dog? Personally my issue isn’t with the council getting involved, so much as it is with the idea of trying to prop up something which has clearly been unsustainable for years.

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  • mark wadsworth says:

    @ Hubbers & Inbreda.

    I don’t know whether these particular Cllrs have BTL portfolios, but what we do know is that most MPs have a second home, which makes the HPC all the more satisfying …

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  • Are these Labour councils ?

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  • I always knew councillors were clever people – look how well they run the councils. I wonder how they will fund the mortgages. Through council tax, or via an arrangement with a bank?

    I have a better idea though. The BoE can set up a franchise arm, whereby any individual can set up a People’s Bank, receiving suitable desktop software and a manual in return for a lodging a modest deposit (say £10) at the Bank. With a generous fractional reserve stipulation, anyone can then lend out arbitrarily large sums of money, thus resolving the lack of mortgage supply, supporting the important financial services industry, and making everybody rich. If anyone is interested in this idea, please send money.

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  • All this slagging misses the point that they used to do this anyway. The way to make this work “…in everyone’s interest” is to peg what they can offer to 3.5x salary. This way, they can offer mortgages that have some prospect of being repaid — if they aren’t, they own the lease anyway — so there is no risk to the ratepayer (hell, there might even be some profit).

    By pegging the mortgage offered to ability to pay, this will actually deflate house prices (rather then re-inflate them, which is what everyone is getting at here): if the council are only offering 3.5x salary (say, ~ £75k), then that will serve to further depress prices, with a knock-on effect — any other house that wants to sell locally will have to drop its price to match…

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  • Davip:

    Well, that was some time ago. In those days mortgage lending was quite constrained compared to the last 2 decades. Long term perhaps a return to sensible lending by building societies and other small institutions might be a good idea, although I doubt that will happen. At present I doubt the intervention of councils would make much difference overall.

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  • still renting says:

    We may think the banks are incompetent but we know our local councils are incompetent.

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