Taxpayer to take on mortgage risks of first-time buyers

robmatic

This will basically have the effect of:

a) increasing supply
b) reducing demand in the secondary market for homes, as FTBers are enticed towards new builds

Downward pressure on house prices is a good thing, right?

shortchanged_2

Although fundamentally I think it is a poo idea, I don't think it will have any drastic affect on house prices as long as the banks maintain other strict lending criteria such as income multiples and keeping IO mortgages to a very, very low level.

Graham_Devon

The risk is actually higher than many people will realise, as it's on new builds. Obviously this will push the prices up in the first place, as they have been made more accessible. However, everyone moving in will be in neg equity straight away.

Not really their problem though. It's ours.

System

I thought part of the problem had been that mortgages were too readily available to people who could not afford them.
So what are the likely consequences of resuming loans to people who can't afford them?

Graham_Devon

Oh and our risk is £400m.

Or 3300 homes at around 120k each.

doire_2

The link wont open for me so can anyone tell me if this only affects FTB in England? Also is it only for FTB buying new builds or any house?

Graham_Devon

doire wrote: »

The link wont open for me so can anyone tell me if this only affects FTB in England? Also is it only for FTB buying new builds or any house?

Only FTB's. Only new builds. Only England.

doire_2

Graham_Devon wrote: »

Only FTB's. Only new builds. Only England.

Game over then

shortchanged_2

Clifford_Pope wrote: »

I thought part of the problem had been that mortgages were too readily available to people who could not afford them.
So what are the likely consequences of resuming loans to people who can't afford them?

Like I said, if the banks maintain other strict lending practices then I doubt it will make a lot of difference.

Graham_Devon

Banks must be loving it.

First we bail them out. Then we give them QE and wiggle our fingers at them to make sure they use it properly.

When they don't we moan and wiggle our fingers in a more stern fashion and place them on the naughty step.

When the naughty step method doesn't work, we give in and say "oh ok, tell yer what, as you got burnt lending to high risk borrowers, why not pass the buck our way...we'll cover any downsides in risky lending, but you can keep all the upsides..."