Government Lending to house buyers: is it a good idea?

Teacher2301

Crazy as it seems but why is our government lending and insuring the 'toxic' debt run up by less-than scrupulous bankers with tax payers money?

Here is an idea I would like moneysavers to comment on...

Should the government lend taxpayers money back to the taxpayers to help ride out the recession rather than 'giving' billions away to banks?

For example, a homeowner in negative equity needs to remortgage but cannot with any lender, should he (or she) be able to approach the treasury, apply for a mortgage, re-pay his (or hers) mortgage back to the bank (thus reduce the toxic debt on the loan books and decreasing the bad debt of banks) and preventing a reprosession. Also, this may ignite confidence in the housing market and see a slow return to (whatever it is!) normality...

Please comment...

Swipe

No way, enough money has already been wasted on three legged horses, let alone allowing home owners in negative equity to re-mortgage, that's just throwing good money after bad.

anotherpaul_2

Teacher2301 wrote: »

For example, a homeowner in negative equity needs to remortgage but cannot with any lender, should he (or she) be able to approach the treasury, apply for a mortgage, re-pay his (or hers) mortgage back to the bank (thus reduce the toxic debt on the loan books and decreasing the bad debt of banks) and preventing a reprosession. Also, this may ignite confidence in the housing market and see a slow return to (whatever it is!) normality...

And how would this reduce the toxic debt? The borrower just ends up owing the same amount as they owed before (ignoring fees). If you owe 100K on a house worth 90K, how is taking a 150K loan to buy a house worth 140K helping? All you're doing is moving toxic debt from the banks to the treasury.

Or are you suggesting the government just take on the existing debt? Again how does that help?

(Incidently, the governments loan guarantee scheme is a disaster waiting to happen. The banks have a much better idea how toxic their loans are then the government - do you think they're going to be honest?)

poppysarah

The debt that exists is already pretty toxic but the govt seems to think that making more toxic debt will sort it all out.

You should look at how many of them BTL and 2nd and 3rd properties dotted around the planet and then see how little they care for ordinary people's lives.

Teacher2301

Swipe wrote: »

No way, enough money has already been wasted on three legged horses, let alone allowing home owners in negative equity to re-mortgage, that's just throwing good money after bad.

Even if this was a better way to spend tax-payers money...would paying banks be any better?

Teacher2301

anotherpaul wrote: »

And how would this reduce the toxic debt? The borrower just ends up owing the same amount as they owed before (ignoring fees). If you owe 100K on a house worth 90K, how is taking a 150K loan to buy a house worth 140K helping? All you're doing is moving toxic debt from the banks to the treasury.

Or are you suggesting the government just take on the existing debt? Again how does that help?

(Incidently, the governments loan guarantee scheme is a disaster waiting to happen. The banks have a much better idea how toxic their loans are then the government - do you think they're going to be honest?)

I agree - I wanted to raise the topic to see what people think about where best to have the toxic debt - is it better in the bank board room where they can pay themesleves nice pensions.

Teacher2301

poppysarah wrote: »

The debt that exists is already pretty toxic but the govt seems to think that making more toxic debt will sort it all out.

You should look at how many of them BTL and 2nd and 3rd properties dotted around the planet and then see how little they care for ordinary people's lives.

Look what would happen if their dumped all their houses onto the market - prices would drop even further and the result would be even more toxic debt would it not? perhaps landlords could be a saving grace and start buying houses to rent, thus stabilising the market but what we don't want is a reverse and see house prices shoot up.

poppysarah

Teacher2301 wrote: »

Look what would happen if their dumped all their houses onto the market - prices would drop even further and the result would be even more toxic debt would it not? perhaps landlords could be a saving grace and start buying houses to rent, thus stabilising the market but what we don't want is a reverse and see house prices shoot up.

Without house prices dropping masses of current toxic debt is just joined by future toxic debt.

Rents need desperately to come down. The council waiting lists are a good indiator that people are sick of paying extortionate rents to private landlords.

The banks should not have been given a penny. The government merely had to pledge to keep all deposits safe - implementing rules to allow this to happen in a nice sensible way.

As is it the govt handed over shed loads of OUR cash to bail out banks not customers of banks. There were no rules attached.

Teacher2301

poppysarah wrote: »

As is it the govt handed over shed loads of OUR cash to bail out banks not customers of banks. There were no rules attached.

Yes I agree with your point. No rules were attached and look at the mess we are in - (or rather let us not worry about the rules until someone catches us (the government et al)).

Blacksheep1979

The problem with the banks was the irresponsible lending to start with - they don't seem to be able to win here. Either they loan money to people (when they shouldn't be) and prop up the dodgy housing situation and get told they're irresponsible or they don't lend to people they shouldn't and everyone moans again.

Personally, they've got my money - I want it back asap and don't think it should be given to people in negative equity and or those who may not be able to afford to pay it back.

Teacher2301

Thanks Blacksheep 1979, Poppysarah, anotherpaul and Swipe for your comments, trying to get a common theme but as Blacksheep points out - it's the banks fault, so should we have left them to fail - this is capitalism afterall isn't? (we'll probably not - is it the Socialists Republic of England....:()