Tuesday, May 31, 2011

Why not take away the House Price prop?

Banks, homebuilders in talks to boost home loans

"Banks are in talks with housebuilders to find ways of helping homebuyers overcome tight lending conditions to get a foothold on the property ladder, the Council of Mortgage Lenders said on Tuesday". "...One way that housebuilders can help to ease the flow of lending is by injecting equity into a fund, which can be used as a guarantee for mortgages and would reduce the amount of cash deposit that must be put down by the homebuyer". (thoughts anyone?).

Posted by alan @ 03:20 PM (708 views)
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4 thoughts on “Why not take away the House Price prop?

  • Just 2 thoughts Alan…
    1. Maybe if the thing you’re trying to sell can only be bought if you guarantee the loan taken out to buy it, maybe it’s too expensive.
    2. How can an industry have costs rising a little bit every year for a lot of years and sale prices rising a lot every year for a lot years and still be in trouble?

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  • “One way that housebuilders can help to ease the flow of lending is by injecting equity into a fund, which can be used as a guarantee for mortgages and would reduce the amount of cash deposit that must be put down by the homebuyer”

    Sounds like China giving the US a helping hand to buy Chinese goods.

    Or Germany/France giving the PIGS the temporary wherewithal (euros) to buy German/French goods or to shop in German/French retail chains in their countries.

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  • Acts of desperation.

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  • Surely the cost of injecting equity into a guarantee fund (risk and/or opportunity cost) is equivalent to the amount asking prices are inflated above true market prices. So it would be simpler for all concerned if the asking price was lowered.

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