Wednesday, December 10, 2008

Study identifies mortgage holiday proposals as “political manoeuvre”

2-year mortgage holiday could lead to debt nightmare

The government’s 2-year mortgage holiday could leave cash strapped consumers in a worse financial situation, mortgage services provider Exact warns today. The firm has done a study of the government’s plan to defer mortgage interest payments for two years and has slammed it as badly thought out and little more than political spin. With property prices nose-diving it says that deferring mortgage interest payments could mean that cash strapped borrowers just run up more debt against a property that is rapidly losing capital value.

Posted by jack c @ 11:29 AM (1032 views)
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10 thoughts on “Study identifies mortgage holiday proposals as “political manoeuvre”

  • Oh yes. Of course – that’s the wildcard!

    While the property is devaluing, delaying repayment is like fanning the flames.

    Wow that’s ill thought out – just like New Labour to forget that inconvenient fact, thinking that the value of the property will basically go up – when it won’t.

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  • or more like the Mortgage lenders are basically confessing they think prices will continue to fall for 2 years and that they will therefore recover LESS from borrowers upon reposession and don’t trust the Government to sort the maths for the gap.

    The hapless homeowner (or debt owner) is basically staying in what is a taxpayer funded council house. Faced with the obligation to house the person in 2 years, rather than now. Who will be in Government in 2 years, and what house they are thinking about is not even on the radar.

    You have to hand it to Labour – they are mortgaging EVERYTHING to get out of culpability

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  • That’s a good summary, but of course it’s just a gimmick. Just about everything Nulab have ever done has been a gimmick with an eye to winning the next election. They know that, we know that. So why do people keep voting for them? To answer my own question, it’s because we are now (nearly) all reliant on some taxpayer funded job, handout, tax break, gimmick whatever. Nulab have succeeded in bribing everybody with everybody else’s money.

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  • I can’t help but wonder if this is another govt blunder (10p tax rate, VAT reductions etc…) or if it is a threat to the banks?

    Is the govt essentially signalling to the banks that they have done their bit (dropping BoE rates) and that if the banks don’t play ball and start lending again they will bring in the 2 year “holiday”, resulting in banks only being able to repossess when property values will have fallen another 20-30% ?

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  • I fear that the reason everybody keeps voting for them is that because at each step of the way, they feel better off with New Labour, even though they face poverty long term.

    You can boil frogs alive if you heat the water slowly enough.

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  • The scheme will be voluntary – it is up to banks to decide on a case by case basis whether to take up the government’s offer to guarantee the interest charges. If it looks likely that the asset will not cover the debt (and the asset is depreciating) then the building societies will go ahead and reposses at the earliest opportunity. That is why the scheme is only goiung to benefit 8000 owners-compared to 75000 reposessions – in most cases the banks will not take up this option.

    It reminds me of their other scheme to buy up unsold houses and turn them into social housing. It sounded good until you realised it was only going to amount to a couple of hundred houses in the whole of the UK.

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  • Did anyone watch Prime Ministers Questions today? Freudian slip by Brown – talking about the recapitalisation of banks he said that Labour had “saved the world”

    Giving praise to GB for bailing out the banks is like praising somebody for setting their own head on fire and then trying to put it out. Well done GB.

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  • I made exactly the same point on Peston’s blog when this madcap scheme was first announced. The idea that it would be a good thing to allow people with a debt they already cannot service, to roll up that debt for a further two years, while the asset against which the debt was originally incurred continues to DEpreciate, simply puts those debtors further into debt. Under this scheme the taxpayer will insure against the debtor not repaying the portion of the debt which has been rolled over for two years. However, I don’t think I’ve seen it mentioned that the taxpayer will insure against any decline in the underlying asset! Would a bank rather repo a property today worth, for example, £200,000 or repo the same property when, at a 10% annual decline, it’s worth £162,000 in two years time? Answers on a postcard, please!

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  • As Gordon has “Saved the World” shouldn’t he be made a saint?

    I would support such an idea immediately, if only because the Roman Catholic Church will only canonize someone who is DEAD !

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  • Didn’t some of us here already point this out?

    (MW: Is it a gimmick, or is it a reverse usage of crying wolf? Keep pumping out gimmicks so that our underhanded move gets through unnoticed, Hmm, I seriously wonder if the cabinet actually want to win next time.)

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