Fuelling the housing boom is a key policy for the UK’s illustrious leaders, it is a misguided and dangerous policy. It is unsustainable, puts debt onto public balance sheets, it is not an indication of true wealth and eventually, the bubble will burst. The UK
Ponzi scheme Keynesian economic policy requires this additional debt and demand, to add fuel to an overburdened fire, those left holding this debt will be become part of the inferno and it will be the UK public who will be burnt to a crisp. Courtesy of The Telegraph:
The chairman of the Council of Mortgage Lenders has warned that the property market will need to be gently weaned off the Government’s scheme
The housing market risks becoming “addicted” to the Government’s flagship Help to Buy scheme unless a clear exit strategy is set out, the Council of Mortgage Lenders’ chairman has warned.
Nigel Terrington said that people “deserve” to be given a vision of what the housing market is going to look like over the next 10 or 20 years, not just short-term fix policies.
He said that Help to Buy must not “morph” into the UK’s version of United States mortgage giant Fannie Mae and a “carefully enunciated, agreed and managed exit strategy” is needed.
The new phase of Help to Buy was launched last month to inject fresh life into the UK housing market by offering state-backed mortgages to aspiring home buyers with deposits as low as 5pc. Industry figures have already shown a dramatic increase in demand for loans over the summer.
Mr Terrington told a mortgage conference in London: “We don’t want our customers – or the lending community – or indeed the political party of the day – to become addicted to the scheme as a permanent component of the UK’s financial system.”
He said the British pursuit of home ownership has bordered on the “obsessional” at times and the market needs to recognise its own tendencies towards excess as well as those of its customers. Lenders covering most of the mortgage market have committed to eventually taking part in the new initiative, with some products being launched in October by state-backed lenders Royal Bank of Scotland (RBS), NatWest, Halifax and Bank of Scotland.
The initiative is the latest in a string of schemes such as Funding for Lending, NewBuy and stamp duty holidays for first-time buyers which have aimed to breathe life back into the housing market in recent years as people struggled to get access to a mortgage and raise finance for a deposit following the financial downturn.
The Bank of England will monitor the impact of the new phase of Help to Buy on the market and its Financial Policy Committee, which oversees stability, would need to agree to any future extension beyond its planned three-year life.
Mr Terrington, who is chief executive of buy-to-let mortgage lending specialist Paragon, said: “It’s important that Help to Buy doesn’t morph into the US scheme, Fannie Mae.
“It should be a time-limited intervention to correct what is seen by the Government as a temporary failure in the market to provide high loan-to-value mortgages in quantity. It must be a temporary fix – not a permanent feature.”
Speaking at the CML’s annual Mortgage Industry Conference and Exhibition, Mr Terrington said that careful planning is needed for the end of Help to Buy. He said: “We need tapering at the end of Help to Buy; not a cliff edge.”
Calling for more long-term thinking to be built into policy, Mr Terrington said: “What we need is a Goldilocks market. Where it’s neither too hot nor too cold. A market where lenders have business plans which temper short-term profitability with long-term sustainability.”
He said that a joined-up strategy can only be driven by the Government.
Mr Terrington said: “Housing strategies in the past have tended to last for one Parliament, if that. We have had 12 different housing ministers in the last 16 years – three in the last three years alone.
“But housing should be operating to a far longer timescale. It’s a matter of profound regret that we don’t seem to be able to form a 10-20 year vision to meet housing needs.
“It is the fundamental infrastructure by which the people of this proud nation live. They deserve better than this.”
He also suggested mortgage lenders and their customers should work together on building longer-term relationships with each other.
Mr Terrington said: “Arguably one of the problems in the mid years of the last decade was that borrowers were encouraged to treat mortgages as short-term instruments, forever being cashed in and remortgaged. This did not help develop relationships between lenders and consumers.”
Several major figures have voiced concerns about the new phase of Help to Buy, which was expected to be launched in January before the date was brought forward to last month.
Fears have been raised that without a big increase in the supply of homes, the scheme will simply push up house prices as demand from would-be buyers lifts. Figures released by Halifax today showed that house prices across the UK have risen by almost 7% annually.
Bank of England governor Mark Carney has said the Bank is “acutely aware” of the potential threats of stimulus measures and action will be taken to clamp down on mortgage lending if needed.
Last month, Antonio Horta-Osorio, chief executive of Lloyds Banking Group, said the scheme must be matched by a boost in housebuilding.
Prime Minister David Cameron has dismissed fears over Help to Buy and said it was “the right thing to do”.