Government plans 40bn sub-prime bailout - Mortgages to be nationalised?

Max_Headroom_3

wymondham wrote: »

Ah, but how do you decide who made a bad financial decision/irresponsible, who was dealt a bad set of cards?

There have always been people who lost their job, or perhaps were injured and unable to work, whatever and found themselves unable to pay their mortgage and ultimately out of their home, even bankrupt as a result of a major and unforseen circumstance. Where was their bailout?

Now we have a huge tranche of people who jumped on the property bandwagon and were (foolishly) leant money they could never afford to repay if things got sticky (interest rates went up or lending tightened).

What the government is now proposing is to bail out those people (since that's what's changed) and of course in effect the banks that lent them the money.

Nett result is that no one suffers and no one loses anything. Not the imprudent borrowers who keep their house even though they couldn't afford it, not the banks who don't now end up repossessing a house they leant too much on which is now worth less than they leant.

Everyone wins except the prudent who is now being asked to underwrite the above groups mistakes.

Most importantly, no one learns any (admittedly painful) lessons. No one will be saying to their kids "careful what you borrow, make sure you can pay it back if things tighten, look what happened to us", no bank directors will be saying "Whatever happens make sure our borrowers can afford it, we don't want to end up in that mess again".

And house prices may not drop to the level they need to reach for things to go back to normal where those normal hardworking families can again afford normal family homes. First time buyers will still be locked out.

lynzpower

the more I hear of this, the more I'm convinced that we should take our cash out of the UK and disappearing elsewhere. Hell it really doesnt matter where right now. Our savings could certainly keep us going without earning in some parts of the world for 5 years at least. We could easily buy somewhere for cash elsewhere ( somewhere less-developed)

For a prime minister, to overrule the Treasury, its ALMOST unheard of . The fact is SOMEONE needs to step up to this. Vince Cable seems to be the only lone voice saying anything- and he is one man- against a tide of financial and economic insanity!. Where the hell is the "opposition"? What a crap political situation we find ourselves in. Where is the uprising? Where is the voice of the people? Nowhere. We have no politics anymore. So democracy is pointless, as only ONE of our national representatives seems to be saying anything! The government are totally silent on this, piping up with useless ideas, that god forbid come to fruition.

Incidentally, I wonder, would the IMF be able ( Generali, do you know?) to intervene and say that a move such as this would make the country too financially unstable? I mean, If you think about it, where is the government going to get this money from? We are going to have to borrow it- where from- and at what rates? and who will pay it back- once we are all veering toward insolvency.

Wonder what also will happen to the swathes of london that is going to become literally unmortgageable or uninsurable over the next 10 years, as global warming hits us and suburbs are submerged, if the Stern report is to be believed and all news reports on this are followed. If I had a government backed mortgage on a house that was frequently submerged, Id give you one guess what we'd do.

wymondham

Max_Headroom wrote: »

There have always been people who lost their job, or perhaps were injured and unable to work, whatever and found themselves unable to pay their mortgage and ultimately out of their home, even bankrupt as a result of a major and unforseen circumstance. Where was their bailout?

Now we have a huge tranche of people who jumped on the property bandwagon and were (foolishly) leant money they could never afford to repay if things got sticky (interest rates went up or lending tightened).

What the government is now proposing is to bail out those people (since that's what's changed) and of course in effect the banks that lent them the money.

Nett result is that no one suffers and no one loses anything. Not the imprudent borrowers who keep their house even though they couldn't afford it, not the banks who don't now end up repossessing a house they leant too much on which is now worth less than they leant.

Everyone wins except the prudent who is now being asked to underwrite the above groups mistakes.

Most importantly, no one learns any (admittedly painful) lessons. No one will be saying to their kids "careful what you borrow, make sure you can pay it back if things tighten, look what happened to us", no bank directors will be saying "Whatever happens make sure our borrowers can afford it, we don't want to end up in that mess again".

And house prices may not drop to the level they need to reach for things to go back to normal where those normal hardworking families can again afford normal family homes. First time buyers will still be locked out.

excellent post - a voice of reason.

Ian_Griffiths_Halifax

lynzpower wrote: »

Our savings could certainly keep us going without earning in some parts of the world for 5 years at least. We could easily buy somewhere for cash elsewhere ( somewhere less-developed)

If you can find a Country less developed than the UK then please PM me and I'll join you. This country is going backwards and is now the dog poop on the boot of humanity.

It seems like the Government are getting in a bit over their (our) heads.

Next we'll be hearing that they have remortgaged the Country on a Debt Consolidation Mortgage with the World Bank, on a Self Certification mortgage as they 'know they have more money coming in than they can prove, as they know they have lots of VAT income but not as much should be provable as they aren't getting the income tax to prove they are earning enough to spend this money".

It'll be a 90% Self Cert deal leaving the Isle of White mortgage free in case of emergencies and we all have to move there.

lynzpower

If you can find a Country less developed than the UK then please PM me and I'll join you. This country is going backwards and is now the dog poop on the boot of humanity.

Im searching. Will let you know

Dithering_Dad

Max_Headroom wrote: »

If a family goes bankrupt because they've borrowed too much and cannot keep up the payments and is evicted from their house, that house does not then suddenly disappear, it still exists. It will be sold somehow at market value, whatever that is.

Now that market value may have to be very low. If so chances are it will be bought by someone who will rent it out perhaps (maybe at a lower rental income as he won't need so much to cover the mortgage), or by someone (another family maybe) who will be able to afford the mortgage now it is much lower. Either way it will be back in circulation as a home, and at a much more realistic and affordable rate. So no need for all this B&B housing you suggest.

The fact is that you simply cannot have a system whereby people who cannot pay their financial borrowings are bailed out en mass by the government. The reason we pay back our loans is because if we don't we lose the things we've borrowed for. A system whereby the financially impudent get bailed out by the prudent is unthinkable. Financial suicide for the foundation of the countries finances.

Remember, this whole mess (ridiculous house price increase to the point where property simply went out of reach of famlies needing it) was caused by imprudent lending by the banks, and imprudent borrowing by the public. This is now self correcting and however hard that is, it needs to happen so things can get back to normal and ordinary people can once again afford that basic need, housing.

This scheme is no more than the government becomeing a sub prime lender. One of the very cornerstones of the financial disaster or silly house prices over the last 5-10 years that got us into this big mess.

Always nice to read a decently worded and well-considered post, rather than
!!!!!!'s ranting soundbite nonsense. I do so prefer debating with people of intelligence.

There is talk of council's being allowed to purchase repo and discounted homes, so if this gets the green light then it'll help to aleviate the shortages. The problem with your private rental argument above is that a family that has been reposessed and possible bankrupted will not pass a credit check and so it would be unlikely that a private landlord would risk his investment on these people. It's also unlikely that they would be able to raise a deposit. While some landlords do rent to DSS, the majority prefer to stay clear.

If the options are that a family are reposessed and bankrupted (which means we pick up the whole tab anyway in increased mortgage rates) and then need to be rehoused in B&B's at huge expense until a council property becomes available as apposed to giving them access to a cheaper mortgage rate to help them through a financial downturn. I know which I'd prefer to do.

It's a bit like the third world charity slogan, "Give me a bag of rice and I'll feed my family for a week. Give me a bag of seeds and some tools and I'll feed my family forever".

We already have a system where people are bailed out en-masse by the government. Hence why I'd much prefer to help people to help themselves than to have them fold and become a long-term burden on the tax system.

Dithering_Dad

lynzpower wrote: »

the more I hear of this, the more I'm convinced that we should take our cash out of the UK and disappearing elsewhere. Hell it really doesnt matter where right now. Our savings could certainly keep us going without earning in some parts of the world for 5 years at least. We could easily buy somewhere for cash elsewhere ( somewhere less-developed)

And you'll come running back as soon as you or a member of your family becomes ill.

meanmachine_2

Utter insanity.

If that gets passed we're all doomed.

May as well give up our jobs and let the government spoon fed us.

Looks like Brown will do anything to save his own skin - including literally mortgaging the country to do it.

The fact is: house prices are too high. The medicine is: falling house prices.

Sometimes the medicine tastes bad, but it's for our own good.

Those who blundered into the housing market in 2006/7 and bought at the peak MUST take the consequences of their own greed and stupidity.

Max_Headroom_3

Dithering_Dad wrote: »

Always nice to read a decently worded and well-considered post, rather than
!!!!!!'s ranting soundbite nonsense. I do so prefer debating with people of intelligence.

There is talk of council's being allowed to purchase repo and discounted homes, so if this gets the green light then it'll help to aleviate the shortages. The problem with your private rental argument above is that a family that has been reposessed and possible bankrupted will not pass a credit check and so it would be unlikely that a private landlord would risk his investment on these people. It's also unlikely that they would be able to raise a deposit. While some landlords do rent to DSS, the majority prefer to stay clear.

If the options are that a family are reposessed and bankrupted (which means we pick up the whole tab anyway in increased mortgage rates) and then need to be rehoused in B&B's at huge expense until a council property becomes available as apposed to giving them access to a cheaper mortgage rate to help them through a financial downturn. I know which I'd prefer to do.

It's a bit like the third world charity slogan, "Give me a bag of rice and I'll feed my family for a week. Give me a bag of seeds and some tools and I'll feed my family forever".

We already have a system where people are bailed out en-masse by the government. Hence why I'd much prefer to help people to help themselves than to have them fold and become a long-term burden on the tax system.

Fair comment (and thanks for your kind words). I see where you're coming from, but I just don't see that "bailing out" overindebted people is the way to do it.

One thought is, we have a situation whereby big developers cannot sell new built houses and councils are short of council houses (and likely to need a lot more). Maybe there is the bones of an idea there. Although you're still potentially "rewarding" the financially imprudent with a spanking new house on a new estate (and any private buyers on that estate who've struggled to get there through their own endevours are going to be mighty put out!)

I suppose in short I simply don't know what the best answer is. But I do feel strongly that the government getting into what I can only see as basically sub prime mortgage lending thus removing financial responsibility from both banks and imprudent borrowers at a stroke (and at the direct cost of the prudent) is absolutely not the answer.

neverdespairgirl

Ian_Griffiths_Halifax wrote: »

If you can find a Country less developed than the UK then please PM me and I'll join you. This country is going backwards and is now the dog poop on the boot of humanity.

I honestly don't agree with this.

Let's not all join the foil hat brigade and panic!

If England were what England seems,
And not the England of our dreams,
But only putty, brass and paint,
'Ow quick we' d drop her....,
But she ain't.

Rudyard Kipling.


("But what should they know of England,
Who only England know?")