Sunday, February 6, 2011
The clearest logic yet spoken on the housing market
Banks should not be pressured into increasing mortgage lending in order to get more people into the housing market. This argument suffers from "the fallacy of composition". For an individual, the availability of more money may help them to become a property owner, but this is not true for the population as a whole. The supply of housing is fixed. An increase in mortgage lending will only generate higher house prices. What's more, if the Government makes special provisions for particular groups in society that it believes deserve support, such as first-time buyers or so-called "essential" workers, rather than improving the overall availability of housing, this only shuts out others deemed to be less worthy.