£500,000 home loans backed by the taxpayer as NewBuy Guarantee scheme launched

[AtW]

David Cameron will today formally open the NewBuy Guarantee scheme, where the Government guarantees part of a homebuyer’s mortgage, allowing them to take out much larger loans than they might otherwise be eligible for.

The guarantee will allow people buying new-build properties to borrow up to 95 per cent of the value of their new home. (AtW's comment: so that's to support house builders then to prevent them from dropping prices to realistic level?)

Since the credit crisis that began in 2007, most people seeking to buy a newly-built property have been able to borrow no more than 80 per cent of the sale price.

As well as helping would-be home-owners, ministers say the new scheme will boost the construction industry – officials estimate that up to 50,000 jobs could be supported if the guarantee is fully used.

However, it could also raise fears that the State could end up guaranteeing more risky borrowers.

Some estimates suggest that the average deposit required for a mortgage is close to £38,000.

High inflation and squeezed wages mean that even people with salaries that would allow them to meet monthly mortgage payments can struggle to save such a sum.

According to the Government, the average age of a first-time buyer is now 37 in some parts of the UK.

Rising rents are also skewing the market against owner-occupiers, making it harder to save and attracting growing numbers of buy-to-let investors. .

Source: £500,000 home loans backed by the taxpayer as NewBuy Guarantee scheme launched - Telegraph

WTF is he doing?

[TimberWolf]

Barking mad.

[TimberWolf]

If the fecker allowed house prices to drop, people might have some chance of being able to afford them.

[mos]

"High inflation and squeezed wages mean that even people with salaries that would allow them to meet monthly mortgage payments can struggle to save such a sum."

Yeah .... makes me wonder how the underwriters will stress variable interest rate for guaranteed mortgages ...

[TimberWolf]

For those of you that are not barking mad, a brief interlude of common sense follows:

thank you for your attention, you may now return to la-la land. Wibble.

Stone him!

[AtW]

Inflation and high taxes leave no disposable income for people to save - low interest rates don't exactly encourage saving, so people have no money for decent house deposit partly because house prices are still too high.

And those idiots think this problem can be solved by giving some taxpayer backed guarantees

[TimberWolf]

Inflation and high taxes leave no disposable income for people to save - low interest rates don't exactly encourage saving, so people have no money for decent house deposit partly because house prices are still too high.

And those idiots think this problem can be solved by giving some taxpayer backed guarantees

Check this out: http://www.demographia.com/dhi.pdf

Suffice to say the UK housing was described as 'seriously unaffordable'.

Housing affordability was little changed in 2011, with the most affordable markets being in the United States, Canada and Ireland. The United Kingdom, Australia and New Zealand continue to experience pervasive unaffordability.

No tulip Sherlock.

[CheeseSlice]

For those of you that are not barking mad, a brief interlude of common sense follows:

thank you for your attention, you may now return to la-la land. Wibble.

Stone him!

Thanks for that clip, I missed that episode. In 2010 the same guy was saying we would have interest rates of 8% this year. It may not get that bad, but would be interesting to see how far off he was.

Interest rates 'may hit 8%' by 2012 says think tank

Doctor Lilico believes a double-dip recession is likely, which would then be followed by a boom.

He argues that the US and UK monetary authorities will respond to this by printing more money.

Coupling that, he says, with the planned deep government spending cuts, would lead to the fastest economic growth rate since the late 1980s.

Doctor Lilico says in a research note: "Once the economy gets growing sustainably, there will be a huge expansion in the money supply, which will lead to inflation."

The Bank has already pumped £200bn into the economy under quantitative easing to help stimulate demand.

He says that policy of the Bank of England has quadrupled the monetary base and once the economy starts growing properly again, lending will expand and there will then be "too much money chasing too few goods".

Doctor Lilico believes that "once inflation rises, interest rates will rise rapidly as well. Since interest rate rises will raise mortgage rates, the initial effect will be even more inflation".

He expects inflation to hit a similar level to that of the early 1990s, in the region of 10%.

[AtW]

Thanks for that clip, I missed that episode. In 2010 the same guy was saying we would have interest rates of 8% this year. It may not get that bad, but would be interesting to see how far off he was.

Interest rates 'may hit 8%' by 2012 says think tank

They were reasonable people who could not have factored in that the Govt will turn to money printing a la Mugabe.

If rates hit 8% back in 2009 then house price crash would have happened and market would now be healthy, instead they've opted to freeze things at the expense of people who did not get into debt but even now it's not enough - banks are raising interest rates on mortgages anyway, and why not - if inflation is 5% then banks should be making 7-8% return on their investment just to earn done dosh.