Osbourne rejects calls to lower HTB limits

grizzly1911

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)

Question is whether the consumer driven want culture, often associated with a debt spiral, that has been created, really improves your lot in reality.

Who is to say whether the person living in the rain forest is better for it or not and on whose scale you measure it.

Certainly some progress has been worthwhile sadly not all of it is truly beneficial.

grizzly1911

Jason74 wrote: »

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.

I have made this point previously.

When this jump start ebbs away where will it come from next time?

For the past 30/40 years the country and many individuals have sold the assets and moved from a shying away from the tally man to living in a free and easy credit world.

Debt is good, leverage better until off course earning potential and liquidity issues bite.

Wage inflation is just around the corner don't worry.

michaels

With HTB, the discussion seems to be around whether the top limit is too high to be of relevance to FTBs.

Is HTB only available to / designed for FTBs?

I assumed the higher limit was to help 'next rungers' who bought in the nouties and (especially outside London) have little equity so can not make the move up into a family home. In London (where we are saying the problem is) such people are probably not is such a low equity trap because prices have risen so logic would say that the policy works in what it is designed to do and is less important in London as low equity for home movers is not such an issue - whereas for London a higher limit does help for FTBs.

Graham_Devon

michaels wrote: »

With HTB, the discussion seems to be around whether the top limit is too high to be of relevance to FTBs.

Is HTB only available to / designed for FTBs?

I assumed the higher limit was to help 'next rungers' who bought in the nouties and (especially outside London) have little equity so can not make the move up into a family home. In London (where we are saying the problem is) such people are probably not is such a low equity trap because prices have risen so logic would say that the policy works in what it is designed to do and is less important in London as low equity for home movers is not such an issue - whereas for London a higher limit does help for FTBs.

It's open to anyone.

More importantly, many are seeing that it reduces the costs of the mortgage, even if they don't need HTB, so are using it regardless of any perceived need. There are examples of this on the house buying board of this forum. People with 100k deposits using HTB to buy 200k properties, simply because it makes the mortgage payments cheaper (in this instance, using HTB1).

Now, you can't blame them. Though there is a risk on the equity part. BUT, it just shows that HTB is extending not only to FTB's but also those who don't need it, but see it as cheaper credit.

Graham_Devon

michaels wrote: »

With HTB, the discussion seems to be around whether the top limit is too high to be of relevance to FTBs.

Is HTB only available to / designed for FTBs?

I assumed the higher limit was to help 'next rungers' who bought in the nouties and (especially outside London) have little equity so can not make the move up into a family home. In London (where we are saying the problem is) such people are probably not is such a low equity trap because prices have risen so logic would say that the policy works in what it is designed to do and is less important in London as low equity for home movers is not such an issue - whereas for London a higher limit does help for FTBs.

And on this, funnily enough the IFS have just this morning stated that the HTB scheme should be altered. They would like to see it availiable to FTB's only and the cap reduced.

They state the scheme is working in the sense that its unlocking credit, but there is a risk that it's pushing prices up at the same time.

michaels

Here is a suggestion then - make HTB2 available to everyone but only with 50k insured by the govt regardless of LTV. Then it would be fair to everyone whilst giving most benefit to those buying at the lowest end and automatically tapering in impact with higher property values.

Graham_Devon

michaels wrote: »

Here is a suggestion then - make HTB2 available to everyone but only with 50k insured by the govt regardless of LTV. Then it would be fair to everyone whilst giving most benefit to those buying at the lowest end and automatically tapering in impact with higher property values.

Well, it's certainly better than now.

Though I can't get away frmo the fact that we supposedly live in a "free market" and the housing market is still seen, and promoted, as a free market.

The only thing that the market seems to be allowed to do freely at the moment is inflate prices.

Everything else, it seems, especially on the demand side is very much created via policy and chocked up with public insurance. From building the houses to financing them.

So in my mind, if we are to have a free market housing market, these sorts of policies shouldn't even exist and the market should be left to do it's thing (and that includes the banks lending to who they want to lend to based on their own risk appettie). I feel we have set somewhat of a precedence now that we will pump money in to everything and if the banks don't lend, they will get even more favourable "incentives". Goes for builders too. It's a shame only these people are around the table when it comes to new policy as both are now seeing profits rise handsomly as a result of incentives.

If we are to have a market whereby demand is created, I feel we should have something at the other end too, where supply is also created (and I don't mean at the will of the builders who will simply cry for more public money as they have done with every scheme so far). We should also have restrictive caps on lending. IMHO.

I just can't see how this "free market" works with so much intervention at one end. Either it's a free market or it's not.

And yes, I have gone off topic a little! But there does seem to be this idea that we must intervene , but we must continue to pretend it's somehow a free market where supply and demand dictates the direction.

michaels

Graham_Devon wrote: »

Well, it's certainly better than now.

Though I can't get away frmo the fact that we supposedly live in a "free market" and the housing market is still seen, and promoted, as a free market.

The only thing that the market seems to be allowed to do freely at the moment is inflate prices.

Everything else, it seems, especially on the demand side is very much created via policy and chocked up with public insurance. From building the houses to financing them.

So in my mind, if we are to have a free market housing market, these sorts of policies shouldn't even exist and the market should be left to do it's thing (and that includes the banks lending to who they want to lend to based on their own risk appettie).

Though if we are to have a market whereby demand is created, I feel we should have something at the other end too, where supply is also created (and I don't mean at the will of the builders who will simply cry for more public money as they have done with every scheme so far). We should also have restrictive caps on lending. IMHO.

I just can't see how this "free market" works with so much intervention at one end. Either it's a free market or it's not.

And yes, I have gone off topic a little! But there does seem to be this idea that we must intervene , but we must continue to pretend it's somehow a free market where supply and demand dictates the direction.

I guess the problem on the bank lending side it is not a free market. to protect themselves from underwriting possible bank losses the govt has imposed lots of restrictions on lending (via reserve rules).

This has resulted in the peverse postion that those with big deposits can purchase property - hence btl, whilst demand and supply imbalance keeps prices high and pushes up rents.

So the 'cure' to this first market distortion is a second one, HTB2, basically allowing the banks to circumvent the restrictions on lending to borrowers with smaller deposits by moving the risk back to the public sector (for an insurance premium).

And of course the elephant in the room is why given there is such an imbalance in supply and demand, that high and rising prices don't send a signal to build more? After all in most parts of the country build cost plus cost of land at most profitable alternative use is hugely lower than finished house prices. The answer of course is planning policy, the biggest market distortion of all.

Graham_Devon

michaels wrote: »

I guess the problem on the bank lending side it is not a free market. to protect themselves from underwriting possible bank losses the govt has imposed lots of restrictions on lending (via reserve rules).

This has resulted in the peverse postion that those with big deposits can purchase property - hence btl, whilst demand and supply imbalance keeps prices high and pushes up rents.

So the 'cure' to this first market distortion is a second one, HTB2, basically allowing the banks to circumvent the restrictions on lending to borrowers with smaller deposits by moving the risk back to the public sector (for an insurance premium).

And of course the elephant in the room is why given there is such an imbalance in supply and demand, that high and rising prices don't send a signal to build more? After all in most parts of the country build cost plus cost of land at most profitable alternative use is hugely lower than finished house prices. The answer of course is planning policy, the biggest market distortion of all.

Well, the point bolded is quite easy to solve. BTL's are in a much better position than the person buying a home from the outset, due to the BTL being able to take on an interest only loan.

That imbalance could be sorted pretty easily without the need for HTB or any other policy.

Tax allowances are, as far as I am aware, some of the slackest in Europe when it comes to BTL.

Lots of things that can be done without the need for more intervention at one end, again, IMHO.

wotsthat

Graham_Devon wrote: »

Well, the point bolded is quite easy to solve. BTL's are in a much better position than the person buying a home from the outset, due to the BTL being able to take on an interest only loan.

That imbalance could be sorted pretty easily without the need for HTB or any other policy.

No imbalance would be sorted. You'd just ensure that BTL would be for even richer investors who'd get even richer because presumably you'd get rid of HTB too and create a demand for those rentals.