Use 'student loans' to fix the housing problem?

GreatApe

economic wrote: »

i am not convinced about your idea not creating a large demand for housing (and there would cause house prices to rise further). The £60k would probably effect outside the SE much more then London given the price differences.

I see your intentions about reducing the education bubble that clearly exists in this country. but why not just stop funding for all the useless degrees and universities? that way if someone really wanted to do dance at middlesex uni then they will have to fund it themselves not the taxpayer. whereas something that would be productive for the economy can be funded by the taxpayer initially.

and no need for any funding scheme options for housing or pension. as you said we don't have an affordable issue in this country so why tamper with it? why not let the 18year old start work after alevel on an apprentice and start building a "career" and savings from then?

plus to administer such a scheme would be quite complex and costly (in order to prevent fraudulent use of money, property etc.)

Can you propose a workable way to reduce student numbers towards 10% of the population rather nearly 50%? Its easy to say but how would it actually be done?

I can't see how it can be done the left will cry murder the dim kids will cry murder the dim kids parents will cry murder and even much if the dim right who seem to think there is huge value in marginal degree obtainers. The only way you can shrink the education bubble and the massive misallocation of funds is to offer the students choices for the funds beyond just a university education

If it could be proven to be low cost or no cost would you object to it?
I know I am arguing that it would be a big net positive saving but people can't seem to get their heads around it. It could possibly be tried in a small number. Offer 10,000 students the option one year to opt for the hosuign rather than the media studies degree. Put the £600 million loan book up for sale see what it fetches. Indexed link long term gilts have a yeild of negative 1.6% If these index linked bonds could be sold for 0% yield (so 160bp better than the gilts) then its straight away a zero cost proposition. Longer term the 10,000 kids who are homeowners will surely rely on the state less than has they spent the same sum on their dance degrees.

Also this would spread out demand. For instance student numbers are highly concentrated in London. Something like half a million and then a quarter of a million people to service their needs and wants. If the numbers fell in half that would move as much as 300,000 out of London and into the cheaper parts of the country. But that's a side issue of what the local impacts would be. Of course university town like London would be harder hit (house price wise) than non university towns which wouldn't be hit at all.

Having said all this I am aware that more often than bit its best just to leave the economy alone. People might have good intentions but they can't forsee and perfectly predict how a multi variable economy will evolve. If student loans and government support for universities was non existent then this would be a needless proposal. However as things stand as far as I can see it would be a better replacement than the current system.

GreatApe

economic wrote: »

i am not convinced about your idea not creating a large demand for housing (and there would cause house prices to rise further).

That is a risk I don't think it would be much but it is a possibility. It could be offset by varying the stamp duty for second homes higher. My guess is this proposal could see a swing of upto 4% from rentals to owners. That means about 1.1 million landlord owned properties would have to be sold

My view is they would sell as they would have fewer and fewer customers. The recent past landlords have been net buyers but primarily due to migration. From 1945-2004 landlords were big net sellers so its not abnormal or impossible to see landlords sell en mass. It happened in 1945-2004 because landlords had fewer and fewer customers.

Giving young adults the option to buy Homes with their university funds would see once more landlords have fewer customers so they would once more become net sellers. That's the theory anyway

Windofchange

GreatApe wrote: »

It didn't bring down the world and while people like you were running around like headless chickens I was buying undervalued housing and shares and posting on forums that the recession was temporary and actual wealth had not been destroyed.

As for defaults we don't need zero defaults we just need less defaults than the 60% of students defaulting on their loans. Also its mostly none of your business this debt will be sold into the private market just as the student loan books are sold into the private market (but with the student loans we are possibly only getting 60p to the pound on a NPV basis).

So the real test is to see what the market will pay for a loan book covered against housing and against income payment of say 15% of income over £5,000 earnings.

To compare 30 year index linked gilts are yielding NEGATIVE 1.6%
If these could be issued for 0% index linked then its a zero cost proposition
That means £10 billion of the loan book could be sold for £10 billion

It might even be acceptable to sell £10 billion of the loan book for £9 billion.
The government then makes a 10% loss on the loans directly, which is less than the 60% defaulting in current student loans so its still a saving over the kids doing media studies etc degrees.

There are also many subsequent savings for the government eg it saves itself from paying 60 years of housing benefits for some of the young adults. The young adults start work sooner so start paying taxes sooner. Etc

So basically the answer is you don't know this. If you can find some sort of data that says here is the default rate for 18 - 21 year olds on mortgages, then we could have a discussion. What you present is yet again a load of bluster and loose what if situations.

seven-day-weekend

GreatApe wrote: »

That is simply not true nationally. If you look at the census data it shows women have always worked in large numbers in this country. My mother worked my grand mothers worked and my great grand mothers worked that was the norm.

Of course some sections of society like council estates perhaps it was more normal for women not to work but even then its probably a case of birds of a feather stick together that is to say it was confirmation bias you mother didn't work so she was friends with other mothers who didn't work and you think that was the norm when it wasn't.




No the assumption or rather the fact was that the necessities like food cost a LOT more in real terms than today. With necessities like food and cloths etc a lot cheaper it makes sense that banks can now offer 4x joint mortgages. If for some odd reason food/cloths/etc prices went up 500% in real terms then the banks would return to 3-4x single income because that is all FTBs could manage mortgage wise if necessities went up 500% in real terms which is roughly what they were fifty years ago.

The UK is many housing markets not everywhere is expensive. In most the country homes are still cheap in much of the UK you can buy a starter house and your repayment mortgage will be smaller than the rents charged by social housing providers that shows housing is not only affordable in those areas but cheap

Neither my mum nor my sisters (much older than me) worked outside the home after they married, although my older sister later trained as a nurse in her late thirties. My younger sister had to give up her job BECAUSE she married :eek:

No council estates, but I agree that they would mix with other 'housewives', so I considered it teh norm.

I always worked, either full or part-time, apart from some time when my son was small, I'd have hated being a 'housewife', although if someone wants to do that and can afford it, fine.

I am still thinking about the '£60k for a house'. At first glance I think it will put prices up.

Norman_Castle

GreatApe wrote: »

Giving young adults the option to buy Homes with their university funds would see once more landlords have fewer customers so they would once more become net sellers. That's the theory anyway

Landlords would move to renting to private tenants rather than students. Until there is an excess of housing in the UK they would still have tenants.

economic

GreatApe wrote: »

That is a risk I don't think it would be much but it is a possibility. It could be offset by varying the stamp duty for second homes higher. My guess is this proposal could see a swing of upto 4% from rentals to owners. That means about 1.1 million landlord owned properties would have to be sold

My view is they would sell as they would have fewer and fewer customers. The recent past landlords have been net buyers but primarily due to migration. From 1945-2004 landlords were big net sellers so its not abnormal or impossible to see landlords sell en mass. It happened in 1945-2004 because landlords had fewer and fewer customers.

Giving young adults the option to buy Homes with their university funds would see once more landlords have fewer customers so they would once more become net sellers. That's the theory anyway

as with any money management decision, the money to fund your idea will need to make it worthwhile for the taxpayer. because the loans are only inflation linked, unless there is an additional rate they need to pay on the loan it would be free funding by the taxpayer. now the question is would your idea help the average taxpayer in another way? im not sure they will at least not without exhausting other better ways.

also the money that otherwise would fund your idea would instead be used to reduce the deficit and so less likely for tax hikes which would already be a direct benefit for the economy.

for the education bubble problem - why not just phase it in slowly to stop funding degrees? start with the worst like david beckham studies and womens rights. and gradually stop more over the years. and encourage apprenticeships by companies by looking carefully at and possibly overhauling company laws.

i dont see the need to put more money into financial assets such as pensions and housing when it can be used instead more directly in the economy as mentioned above.

GreatApe

Windofchange wrote: »

So basically the answer is you don't know this. If you can find some sort of data that says here is the default rate for 18 - 21 year olds on mortgages, then we could have a discussion. What you present is yet again a load of bluster and loose what if situations.

How can they default the repayments are taken directly from their pay packets via hmrc as is the case for the current student loans and the koan is also secured on the Property.

Repayment would be very close to 100% just in the same way that repayments for normal mortgages are close to 100% housing loans are so low risk that my bank lends to me at 1% nominal which is currently negative 2% in real terms

GreatApe

seven-day-weekend wrote: »

Neither my mum nor my sisters (much older than me) worked outside the home after they married, although my older sister later trained as a nurse in her late thirties. My younger sister had to give up her job BECAUSE she married :eek:

No council estates, but I agree that they would mix with other 'housewives', so I considered it teh norm.

I always worked, either full or part-time, apart from some time when my son was small, I'd have hated being a 'housewife', although if someone wants to do that and can afford it, fine.

I am still thinking about the '£60k for a house'. At first glance I think it will put prices up.

Well yes housewives are friends with other housewives. The norm for women is that they worked you can see this if you look at the census data women have worked in large numbers 20 years ago 40 years ago 60 years ago 80 years ago. Wen did work fewer years 60 years ago because they were able to retire earlier than men and because they had on average more children so had to take a bit more time off for them.

But as I said my experience is the total opposite of yours. All the women in my family going back all the way to great grand parents they all worked including all their female children eg my aunties etc. Maybe you are or were from a better off family

seven-day-weekend

GreatApe wrote: »

Well yes housewives are friends with other housewives. The norm for women is that they worked you can see this if you look at the census data women have worked in large numbers 20 years ago 40 years ago 60 years ago 80 years ago. Wen did work fewer years 60 years ago because they were able to retire earlier than men and because they had on average more children so had to take a bit more time off for them.

But as I said my experience is the total opposite of yours. All the women in my family going back all the way to great grand parents they all worked including all their female children eg my aunties etc. Maybe you are or were from a better off family

Well no, my dad was a machinist in a factory, although both my sisters married professionals.

GreatApe

seven-day-weekend wrote: »

Well no, my dad was a machinist in a factory, although both my sisters married professionals.

Its not just the job you do that makes you well off or not.

Someone can work a low paid job but have inherited half a million pounds and as such live an easy life