7/29/2008

Grim reading for the housing market

I've not got time to write a lot about this right now, but the details of the report commission by the Treasury in to the current state of the mortgage and housing market makes grim reading.

One point the reports seems to be aware of, but his passed the government by, is the current mortgage drought, as the reports author refers to it, will ahve long term effets for the economy.

The commission seems to realsie that people currently renwing their mortgages (I am one of them) are being locked in for three to five years in to higher mortgage repayments which will mean a three to five year curtailment in those people's consumer spending. My own mortgage will be £150 a month higher because of the mortage rates on offer and I would be locked in for three years to this rate.

You have to ask why the government cannot see this is a major problem.

4 comments:

Liberal Provocateur said...

Tell me about it :(

I think we renew our mortgage in November - not looking forward to that at all.

It's funny how when the banks get drunk, we poor shmucks get the hangover.

Banking isn't a free market, so pretending that the market will sort this out is idiocy - The government and bank of england have waded in and thrown tax payers money at the banks, and then we pay AGAIN through higher interest rates.

Typically the banks and government blame "global economic conditions" yet both are directly to blame through reckless investment, followed by profiteering to recoup the losses, faffing with the 22 and 10 pence tax bands instead of cutting or capping duty on fuel, failing to regulate both financial activities and mergers leading to the current highstreet cartel of banks where it's almost impossible for normal people to avoid the bad deals offered by the handful of banks that own 90% of highstreet and online lenders.

*sigh*

All totally predictable and preventable, that's what's so bloody galling.

jdc said...

The Government can see that it's a major (political) problem. They're just having to soften up prudent taxpayers like me for the hit in September that our taxes and savings are going to be raided to bail out people who took out 140% mortgages for fifteen times their income, or what have you.

All the proposals so far seem to revolve around bunging our cash to the banks.

If the mortgage rates you mention aren't being matched by savings rates, the banks will have lots of cash, and don't need my taxes. If they're matched by savings rates, then there will be a redistribution from mortgage owners to savers, renters, and mortgage-free pensioners, and we'll spend that and keep the economy afloat.

If the problem is that the banks have borrowed from elsewhere, and now that's more expensive, the very worst thing the Government can do is trash their own credit rating by extending a line of credit to the banks, massively increasing the long-term cost of the UK's national debt.

I'm willing to bet your new three year fix is still massively below the long-term average rate of around 8-9%. It's probably not even 7%...

The key point, though, remains that our consumer spending is too high. We are living beyond our means, spending too much, and saving too little. Curtailed consumer spending is part of the solution, not part of the problem.

jaymason said...

The same way that 10p tax wasn't a problem, that the October fuel duty wouldn't have been a problem and no doubt the VED proposals won't be a problem either.

There is none so blind as cannot see

Paul Pinfield said...

Nich, I think everyone is missing the hard reality that, unless banks begin lending again - pretty sharpish - they will not make a profit...

They will then cease to trade.

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