Help to buy threat to the UK credit rating?

Graham_Devon

Can't quite tell from this article if they are making out that Help to Buy could be seen as a threat to the UK's credit rating.

Certainly they are suggesting our reliance on inflating property prices and debt is a risk to the sustainability of any recovery and that Help to Buy is only serving to exacerbate this.

“We see risks to the sustainability of any UK recovery based on net lending growth and property inflation, given that UK household debt and house-price-to-income ratios remain higher than in many advanced economy peers,” S&P said.

The agency noted that the Government’s Funding for Lending Scheme was being reined in. But it added: “The Help to Buy program remains in place and, in our view, could increase macroprudential risks in the economy by lowering households’ buffers against any future house price volatility.”

Overall, said S&P said the UK’s AAA rating was supported by the Government’s “commitment to consolidating the budgetary deficit toward balance by 2018 and policymakers’ ability and willingness to respond rapidly to economic challenges.”

http://www.telegraph.co.uk/finance/economics/10530916/SandP-affirms-UK-top-rating-but-warns-of-risks-from-Help-to-Buy.html

Hard hitting critism of the scheme anyway, and something to "doom wishing mongers" have been suggesting for a while.

Loughton_Monkey

Graham_Devon wrote: »

Hard hitting critism of the scheme anyway,........

You can't get any "hard-hitting" than this! Surely Osborne will have to resign on the strength of this....

The agency noted that the Government’s Funding for Lending Scheme was being reined in. But it added: “The Help to Buy program remains in place and, in our view, could increase macroprudential risks in the economy by lowering households’ buffers against any future house price volatility.”

If Ballsie could understand what that means, he'd give the Chancellor a very hard time.....

TruckerT

The agency noted that the Government’s Funding for Lending Scheme was being reined in. But it added: “The Help to Buy program remains in place and, in our view, could increase macroprudential risks in the economy by lowering households’ buffers against any future house price volatility.”

The biggest difference between the above, and some of the statements of, say, Hamish, is that whoever penned the above was highly trained, highly paid, and deemed worthy of being taken seriously by a UK broadsheet newspaper.

What it means is that anyone who uses the Help-to-Buy scheme runs the risk of getting their fingers burned.

It's economics - the science of the bleeding obvious.

TruckerT

grizzly1911

Loughton_Monkey wrote: »

You can't get any "hard-hitting" than this! Surely Osborne will have to resign on the strength of this....



If Ballsie could understand what that means, he'd give the Chancellor a very hard time.....

I wonder if "increase macroprudential risks" was from that bullshot creation website you linked previously. That website must be on overdrive

From investopaedia;-

Definition of 'Macroprudential Analysis'

"A method of economic analysis that evaluates the health, soundness and vulnerabilities of a financial system. Macroprudential analysis looks at the health of the underlying financial institutions in the system and performs stress tests and scenario analysis to help determine the system's sensitivity to economic shocks. Macroeconomic and market data are also reviewed to determine the health of the current system. The analysis also focuses on qualitative data related to financial institutions' frameworks and the regulatory environment to get an additional sense of the strength and vulnerabilities in the system. "

HAMISH_MCTAVISH

TruckerT wrote: »

highly trained, highly paid, and deemed worthy of being taken seriously by a UK broadsheet newspaper.

Hmmmmm....

Like these guys then....

Describing the Government’s controversial Help to Buy subsidised mortgage scheme as “well-timed and targeted”, the EY ITEM Club said there was little risk of a housing bubble and that recovering prices would boost spending and drive GDP growth.

And this guy....

Stephen Nickell, a member of the Office for Budget Responsibility, rejected the idea of a bubble but suggested that demand for homes in Britain was rising faster than their stock.

"You've got a fixed stock of houses... The price has to rise to ration the stock of houses across the people who want to buy.

It's genuine demand," he added.

Nickell expressed little concern about the risk of a housing bubble so far.

"My feeling is that there's quite a long way to go in the housing market before the FPC decides that they want to introduce some sort of restrictions," he said.

And of course, this guy.....

Professor John Kay is the latest credible voice to enter the debate on whether Britain's housing market is becoming overheated.

He takes the view that there is not yet evidence of a bubble, thus siding with Bank of England Governor Mark Carney, among others.

"Talk of another property bubble is wrong.

My concept of a bubble is when people are buying things not for their intrinsic value but because they believe they will shortly be able to sell them at a higher price.

"That was true in parts of the US property market and it was true in Spain.

I don't think it was ever really true in the UK."

TruckerT

HAMISH_MCTAVISH wrote: »

Hmmmmm....

Like these guys then....



And this guy....



And of course, this guy.....

It's all opinions though, innit. None of us will be proved right until we have the benefit of hindsight.

The EY ITEM club sounds like a politically-motivated bunch of ne'er-do-wells, and the OBR lost credibility with many people when they said that the only way we can afford to continue with life as we know it is to bring in lots more immigrants.

If Professor Kay needs to be described as a 'credible voice', then I guess that not many people have ever heard of him. And I think he is wrong - people in the UK are very likely to buy property as an investment first, and as a home second.

TruckerT

HAMISH_MCTAVISH

TruckerT wrote: »

I think he is wrong

But that wasn't your original criteria for comparing the credibility of other opinions versus mine.

What you said was....

highly trained, highly paid, and deemed worthy of being taken seriously by a UK broadsheet newspaper.

All of the above fit that criteria.

And disagree with you....;)

Loughton_Monkey

TruckerT wrote: »

.....If Professor Kay needs to be described as a 'credible voice', then I guess that not many people have ever heard of him......

TruckerT

He's a 'visiting' Professor at the LSE. Anyone associated with the LSE is a raving, left wing, Marxist, pinko, socialist, Spartist, self-ruling Labour Voter who makes Lenin look like Mussolini.....

So he's hardly a right-wing, property-owning, bring-on-HPI merchant, so if he says "yes" to HTB then I guess it can't be too bad.....

.... But you never know. He might have a couple of BTL's hidden away....... offshore..... wife's name and all that..... he's a "boomer" by the way......

.... large gin & tonics all round...

TruckerT

TruckerT wrote: »

It's all opinions though, innit. None of us will be proved right until we have the benefit of hindsight.

The EY ITEM club sounds like a politically-motivated bunch of ne'er-do-wells, and the OBR lost credibility with many people when they said that the only way we can afford to continue with life as we know it is to bring in lots more immigrants.

If Professor Kay needs to be described as a 'credible voice', then I guess that not many people have ever heard of him. And I think he is wrong - people in the UK are very likely to buy property as an investment first, and as a home second.

TruckerT

I just googled EY ITEM club - your quote came from an October forecast and it was preceded by the following -

The EY ITEM Club’s autumn forecast says the boost to housing demand will have a knock on effect on house prices, rising by 3.5% this year and 6.6% in 2014. However, it says that fears of a housing bubble are unfounded and premature at best.

What is the difference between 'unfounded' and 'premature'? And why do they seem to imply that a 3-7% increase in house prices can only be a good thing? Who will benefit?

In their forecast dated 4th December, they said this -

Building on the success of Help to Buy

The report is also calling for a boost to housing supply. While the EY ITEM Club says that fears of a housing market bubble are premature and misplaced, it believes that the Government has an opportunity to further build on the success of the Help to Buy scheme by increasing the availability of new property.

Astorri comments: “While Help to Buy is increasing demand, house building has fallen 47% since its pre-financial crisis peak in 2007 – the lowest level in over forty years. The Chancellor has a real opportunity to build on the momentum behind the housing market recovery by increasing supply. Initiatives such as speeding up the planning system, releasing unused Government land for development, or even providing the green light for the construction of new towns, could have a real impact.”


This sounds to me more like a criticism than unconditional support.

TruckerT

TruckerT

HAMISH_MCTAVISH wrote: »

But that wasn't your original criteria for comparing the credibility of other opinions versus mine.

What you said was....



All of the above fit that criteria.

And disagree with you....;)

Me and Standard & Poors!

TruckerT

Thrugelmir

Graham_Devon wrote: »

Hard hitting critism of the scheme anyway, and something to "doom wishing mongers" have been suggesting for a while.

The "problem" was created in the lending boom years 2003-2007. Help To Buy is merely trying to maintain a stable environment and maintain confidence. The switch to a repayment basis for majority of new mortgages will take time to filter through and have an effect.