Does doing more of the same ever work?

dktreesea

Graham_Devon wrote: »

Funding for Lending has been extended today for another year. It's also been made a little bit sweeter for banks, encouraging them further to lend more.

It didn't really work last time around (hence changing it!) so why do it all again?

Extending it to 2014 will have this scheme running 7 years after the crisis. Were still meddling, nothing has been fixed.

http://www.bbc.co.uk/news/business-22275344

It is incredible, isn't it just?! Here we are 7 years into a recession and the government still can't dream up anything even remotely capable of breaking us out of the doldrums.

dktreesea

IveSeenTheLight wrote: »

Hmmm, interesting play on words there Dev old boy.

For clarity, this link shows that the scheme has been running for less than a year and has been extended for an additional year.

http://www.bankofengland.co.uk/markets/Pages/FLS/default.aspx


So surely this is not doing "more of the same" since 2007.
Even the extension is being expanded to include additional areas.

But the question is why have they taken so long to address the recession? If this was such a good scheme, why wasn't it rolled out as soon as the coalition came to power? Yet another new scheme, likely to be just as ineffective as all the other tinkering around the edges the Coalition have managed, to little good effect, so far.

For instance, they go on and on about their commitment to market forces, yet persist in policies that keep the housing market, both for rents and purchase prices, way above what the value would be if market forces were allowed to prevail, dooming people into spending far more than they ought to have to on accommodation at the expense of all other goods and services.

IveSeenTheLight

dktreesea wrote: »

But the question is why have they taken so long to address the recession?

Rome wasn't built in a day and similarly I don't think they expected to snap their fingers to fix problems.
One step at a time as they say.

dktreesea wrote: »

If this was such a good scheme, why wasn't it rolled out as soon as the coalition came to power? Yet another new scheme, likely to be just as ineffective as all the other tinkering around the edges the Coalition have managed, to little good effect, so far.

As I understand it, whilst other schemes have failed to make the impact that they had hoped for, this scheme is showing tangable results, hence why they want to extend I presume.

dktreesea wrote: »

Bu
For instance, they go on and on about their commitment to market forces, yet persist in policies that keep the housing market, both for rents and purchase prices, way above what the value would be if market forces were allowed to prevail

I'm not aware of policies which are promoting rental prices.
Could you advise me which of these you are referring to.
the cut in HB springs to mind in which many think this will have a significant downwards pull on rents.
I personally think it will have minimal impact.

dktreesea wrote: »

dooming people into spending far more than they ought to have to on accommodation at the expense of all other goods and services.

Again this doesn't make sense.
Property prices are lower than peak on average
Mortgage products are lower than historical average.
Mortgage repayments are lower than the historical average.

The savings made in these areas are COMPENSATING some of other expenditure (Fuel, Utilities etc) that have above inflation icnreases.

dktreesea

IveSeenTheLight wrote: »

I'm not aware of policies which are promoting rental prices.
Could you advise me which of these you are referring to.
the cut in HB springs to mind in which many think this will have a significant downwards pull on rents.
I personally think it will have minimal impact.

Yes, the cuts in HB/LHA may well have minimal impact on the housing market because of the rate of population growth driving up demand. But because of LHA rates still being way too high, rentals are driven up for everyone, not just those fortunate enough to get a boost to their incomes via the LHA.

Take our local LHA rate for a 3 Bedroom house: £184 a week. That rate drives the rentals for all 3 bedroom properties, not just those on which LHA is claimed. Even if you earned £30k a year, so well above average and median earnings, which works out to £447 a week net, you would still have to devote over 40% of your after tax earnings to rent a 3 bedroom house at the LHA rate. And that's before any other housing related costs like gas, electricity and contents insurance. People shouldn't have to devote any more than 25% to one third of their after tax earnings to accommodation.

That rate is meant to be based on property prices at the 30th percentile. So already the person looking for a private rental is on the back foot because only 30% of all properties are priced at or below the LHA.

To me it would make more sense to make the maximum amount of the LHA no more than one third of the median gross annual wage.

IveSeenTheLight wrote: »

Again this doesn't make sense.
Property prices are lower than peak on average
Mortgage products are lower than historical average.
Mortgage repayments are lower than the historical average.

The savings made in these areas are COMPENSATING some of other expenditure (Fuel, Utilities etc) that have above inflation icnreases.

Just because property prices are off the peak doesn't mean they are not still way too high.

If the BBC are correct, the average home is now worth £164k. More telling are the ONS' house price index statistics. in 2011, the most recent figures available, less than a quarter of all mortages went to people earning less than £30k. Given that is over half the population, it isn't as if most people can afford to buy a house. Even with all the tinkering the government does at the margins to encourage banks to lend, banks usually only want to lend between 3 and 4 times annual earnings.

Say you had a 10% deposit and were a first time buyer. Just the kind of buyer the government wants to help. To buy the average house, you would need a mortgage of £148k. Even £35k per annum income isn't enough to borrow that much in today's climate, let alone a more modest £25k to £30k per annum.

And what is propping up prices? Demand may be part of it, but mostly it's the LHA. That alone makes buying a BTL property at inflated prices a fair gamble, because it is the main driver of the rental returns you can expect.

Graham_Devon

IveSeenTheLight wrote: »

As I understand it, whilst other schemes have failed to make the impact that they had hoped for, this scheme is showing tangable results, hence why they want to extend I presume.

You may understand it differently, but the article itself points out....

Since its launch in August, the scheme has been criticised for failing to boost lending.

The scheme is supposed to encourage banks to lend by offering them cheap loans on the condition they pass them on to customers.

Bank of England figures suggest banks took nearly £14bn from the FLS between August and December last year.

However, among participating banks, lending was actually lower in that six month period, than it was in the six months before the scheme was introduced.

Whether lending being LOWER than it was before the scheme was implemented can be seen as a "good set of results" is subject to opinion I guess....and yours is obviously different to mine.

grizzly1911

IveSeenTheLight wrote: »

I'm not aware of policies which are promoting rental prices.





Mortgage products are lower than historical average.
Mortgage repayments are lower than the historical average.

The savings made in these areas are COMPENSATING some of other expenditure (Fuel, Utilities etc) that have above inflation icnreases.

Rental prices will be linked to cost of purchase. If property prices are being held above where they should be then they will a have some impact on rental prices pushing or holding them higher.

Housing prices are being supported by historically low interest rates and kid gloves forbearance.

Whilst you are right that low interest rates and mortgage payments are currently offsetting increased utility costs at some point interest rates will increase but utility costs will not fall. Interest rates are therefore not compensating for higher utility bills just delaying the inevitable.

That isn't so much of an issue if you have surplus income, have choice and can prioritise other spending. For those where the delta has closed and the door shut there is no such choice.

TruckerT

grizzly1911 wrote: »

Rental prices will be linked to cost of purchase. If property prices are being held above where they should be then they will a have some impact on rental prices pushing or holding them higher.

Housing prices are being supported by historically low interest rates and kid gloves forbearance

I would say that house prices are also being held artificially high by the negative equity issue. People simply cannot afford to sell at prices which purchasers can afford because they would still owe money to the mortgage company after the sale was completed.

I agree with the idea that simply doing more of the same is not always the best way forward. That was M. Thatcher's starting point!

Retail banking is apparently not profitable - the banks have been whinging about that for years in order to justify their charges, and the Co-operative Bank seems to have come to the same conclusion.

Rather than worrying about 'ring-fencing', the government might do well to set up a completely new system of personal banking for day-to-day purposes. It wouldn't be complicated - it could be done by an organisation like PayPoint, or by a chain of charity shops, and could be very tightly regulated.

Banks would then be free to continue their casino-style businesses for as long as it remained profitable.

TruckerT

chewmylegoff

Graham_Devon wrote: »

Funding for Lending has been extended today for another year. It's also been made a little bit sweeter for banks, encouraging them further to lend more.

It didn't really work last time around (hence changing it!) so why do it all again?

Extending it to 2014 will have this scheme running 7 years after the crisis. Were still meddling, nothing has been fixed.

http://www.bbc.co.uk/news/business-22275344

Last weekend I was trying to unscrew the cap for the windscreen washer reservoir for my car. I tried turning it with my hand and it didn't work, so I kept trying. After 10 minutes or so of "doing the same" it eventually gave way and turned.

So the answer to your question is yes.

grizzly1911

TruckerT wrote: »

Rather than worrying about 'ring-fencing', the government might do well to set up a completely new system of personal banking for day-to-day purposes. It wouldn't be complicated - it could be done by an organisation like PayPoint, or by a chain of charity shops, and could be very tightly regulated.

Banks would then be free to continue their casino-style businesses for as long as it remained profitable.

TruckerT

Even call it something snappy like Trustee Savings Bank, The Post Office or a Co-op, orl not the first or last.

You are right with the technology we have these days their is no reason why the "bank" couldn't be more lightweight, for day to day needs. Cost of IT infrastructure and maintaining things like ATMs (and security, insurance, as men in balaclavas and baseball bats like easy money) might be a sticking point.

grizzly1911

chewmylegoff wrote: »

Last weekend I was trying to unscrew the cap for the windscreen washer reservoir for my car. I tried turning it with my hand and it didn't work, so I kept trying. After 10 minutes or so of "doing the same" it eventually gave way and turned.

So the answer to your question is yes.

Or you could have used a strap wrench, mole grip or "duster" to do it quicker.