Osbourne rejects calls to lower HTB limits

Graham_Devon

Stating lowering the limit from the current £600k will do more harm than good.

George Osborne has rejected calls for the pricing cap on the Government's controversial Help to Buy scheme to be lowered.

Amid widespread concern that Help to Buy - which offers taxpayer-backed subsidies to buyers with small deposits - is pushing prices up to unsustainable levels, the Chancellor claimed the scheme was helping to stimulate the economy without creating a bubble.

However, he admitted that demand for housing would likely outstrip supply for at least another decade. "Across the board we're pulling a lot of levers [to try to stimulate supply] but this is a historic problem in the UK," he told the Lords Economic Affairs Committee on Wednesday.

On Help to Buy, he said it was doing what it was designed to do, addressing "the failure in the financial system rather than the housing market". Mr Osborne said lowering the purchase price cap from its current level of £600,000 would be likely to do more harm than good.

However, he goes on to say that the average value of a home bought with HTB support is £150k. So not sure how he concludes that lowering the limit from £600k will cause harm.

He also defends the consumer led recovery, which he admits is consumer led, stating that it's not a debt fuelled spend, rather people are spending their income. However, data shows a £23bn raid on savings in the last year, and debt has reached a new all time peak in the UK. So again, his words seem at odds with themselves.

http://www.telegraph.co.uk/finance/economics/10618065/George-Osborne-rejects-calls-for-Help-to-Buy-pricing-cap.html

shortchanged_2

Graham_Devon wrote: »

However, data shows a £23bn raid on savings in the last year, and debt has reached a new all time peak in the UK.

This can't be true Graham. The UK is experiencing the new boom fuelled by the massive wage rises. Everyone in the UK has loadsa money at the moment. There is no need for the UK to start taking on more personal debt.

Thrugelmir

Graham_Devon wrote: »

However, he goes on to say that the average value of a home bought with HTB support is £150k. So not sure how he concludes that lowering the limit from £600k will cause harm.

No evidence to suggest that the current limit of £600k is causing anything adverse. Funding for Lending is being withdrawn so the levers are being pulled back already. BOE can impose conditions on lenders as well.

grizzly1911

Graham_Devon wrote: »

However, data shows a £23bn raid on savings in the last year,

How much of that has gone straight into potentially better investment choices though. I am sure equity based funds, ITs etc. have been recipients too.

I don't doubt that some savings and debt are bolstering the consumer led recovery also for now.

wotsthat

Graham_Devon wrote: »

He also defends the consumer led recovery, which he admits is consumer led, stating that it's not a debt fuelled spend, rather people are spending their income. However, data shows a £23bn raid on savings in the last year, and debt has reached a new all time peak in the UK. So again, his words seem at odds with themselves.

A raid on long term savings? i.e. people have spent their own money rather than having it stolen - talk about journalists writing the narrative.

mayonnaise

shortchanged wrote: »

This can't be true Graham. The UK is experiencing the new boom fuelled by the massive wage rises. Everyone in the UK has loadsa money at the moment. There is no need for the UK to start taking on more personal debt.

I thought that's the way it always worked?
That in good times, when people feel confident about their financial future and job security, they tend to take on more debt?

shortchanged_2

mayonnaise wrote: »

I thought that's the way it always worked?
That in good times, when people feel confident about their financial future and job security, they tend to take on more debt?

Yes, and look where that has got us!

wotsthat

shortchanged wrote: »

Yes, and look where that has got us!

Yes, we're enjoying the best living standards ever experienced by humankind.

How much debt do most people on the planet have and how's it working out for them? (answers...none and not great)

shortchanged_2

wotsthat wrote: »

Yes, we're enjoying the best living standards ever experienced by humankind.

How much debt do most people on the planet have and how's it working out for them? (answers...none and not great)

Yes. you're right as usual.

Jason74

wotsthat wrote: »

A raid on long term savings? i.e. people have spent their own money rather than having it stolen - talk about journalists writing the narrative.

You're right of course. People can spend their own money however they see fit, and if people are choosing to spend more and boost economic output, then all well and good.

However, what the current trend does do, is cast doubt on the sustainability of the recovery. If that spending creates a virtuous circle of ecoomic activity, then it could be the kick start to something sustainable. However, it's also possible that all we're seeing is a short term tend of people runnung down their savings, with another set of problems ahead when that money "runs out". I don't see a problem with financial journalists pointing out this possibility.

Graham_Devon

shortchanged wrote: »

Yes. you're right as usual.

Indeed. It appears we should ignore any of the fundementals on this forum intended to debate the economy.

Instead, when any bit of data comes along that doesn't fit a certain viewpoint, we should ignore that and instead reflect on the fact that we no longer live in caves...

I;m not entirely sure the world wouldn't have been the same without the debt, afterall, consumer debt (on the scale of accesibility we see today) is a relativley new phenomenon in the grand scheme of things.

Everytime one of these types of stories appears (i.e goes against the grain of things looking great), it's always written off as journalists not knowing what they are doing. Yet a story from the daily mail about house prices rising for the next 10 years is just fine.