Wednesday, July 24, 2013

Comments are encouraging

What is ‘subprime’ about George Osborne’s Help to Buy scheme?

Though borrowers will at least be creditworthy, the scheme is still misguided, says John McDermott

Posted by tick tock @ 11:16 AM (4072 views)
Please complete the required fields.



3 thoughts on “Comments are encouraging

  • Agreed.

    Pity that the downsides he focuses on are mostly about the bank subsidies, with the consequences for society as a whole only mentioned as a footnote.

    The reality is that it’s not subprime mortgage lending. These are not NINJA loans. This is about getting credit-worthy young professionals who can’t save a 15% deposit whilst paying sky-high rents, to be able to access all of the 5x joint income that banks would offer them if they had the deposit.

    It is, however…

    i) the state guaranteeing mortgages (a la Fanny Mae and Freddy Mac)
    ii) encouraging people to take on maximal credit halfway through a deflationary period in the leverage cycle
    iii) encouraging people to take on maximal credit at a time when interest rates are expected to rise
    iv) state-sponsored house price inflation at a time when most people think there is a housing bubble
    v) the government gambling taxpayers money in a way that banks aren’t prepared to

    Reply
    Please complete the required fields.



  • Whether or not they are credit worthy is besides the point. The State is underwiting mortgages which would not otherwise have been created. Thus, a person credit worthy for £100k may instead choose to take out a £150k mortgage, thus potentially rendering them uncredit worthy if rates begin to rise. Particularly a bad idea if rates, globally, are about to head on an upwards trajectory.

    Reply
    Please complete the required fields.



  • Whether or not they are credit worthy is besides the point. The State is underwiting mortgages which would not otherwise have been created. Thus, a person credit worthy for £100k may instead choose to take out a £150k mortgage, thus potentially rendering them uncredit worthy if rates begin to rise. Particularly a bad idea if rates, globally, are about to head on an upwards trajectory.

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>