Monday, May 23, 2005

Brown's "A Mortgage Too Far"?

Chancellor of the Exchequer Gordon Brown now proposes a scheme whereby people can ‘rent’ half their new property from the banks/government to enable them to make the first step on the housing ladder.

I, frankly, find this proposal naïve or highly cunning, absurd and in no small part Socialism by stealth, which I shall explain below.

By doing this the government, i.e. Gordon Brown, props up the housing market which allows Gordon to make a smooth segue into the Labour Leadership and the nation’s PM. We are funding his succession campaign.

Alas, what he is doing, as a mere side-show as far as he is concerned, is maintaining and nurturing a bad situation, making it worse, for this will support house prices higher and higher by allowing more first timers to enter the market instead of a natural slowing/stagnation that is ideal after a period of hyperactivity. The peculiar scenario of low interest rates and plentiful credit will be magnified still further.

Not only will it maintain inflated prices, but it will also enable banks to lend when they could not have AND charge rental on ‘equity’ that they did not even have to pay capital for (for ‘lending’ is just creation of money on paper, not passing deposits on). My guess is the government will be charged an admin fee for this ‘service to the nation’.

Correction: WE will be charged via our taxes! Thanks, Gordon.

Such credit will eventually find its way to individuals who sell out and downsize. This credit supply and bubble will likely be spent on holidays and imported goods, or, to put it another way, sent abroad in huge steamer trunks bulging at the seams. Of course, Gordon gets his 17.5% cut on this and the generally higher levels of consumer spending that a buoyant housing market supports…

When the housing market corrects, it will still be the hapless buyer who will lose out. They will see their equity hit, but in this case any hit will be proportionately harder as they would have leveraged their purchase – a 10% downward correction on a £200,000 home is double that on a £100,000 that the buyer would have otherwise only been able to afford.

I do not see the banks taking any hit on any corrections.

Further, the cut-off between those who ‘deserve it’ and those who do not will make a two tier market with a sharp edge. Again, NeueArbeit slams the middle-middle class. More social engineering.

Once in place it is a pair of manacles to following governments – who will DARE remove this contraption from the market and trigger a housing crash? We will be bricked in!

Additional social engineering will occur as the housing market gets more frenzied and the percentage rented out rises above 50%. Very soon we will have people with 75%, 80% and 90% rented. New Labour will have simultaneously privatised and nationalised the housing market – spun off is, I feel, a far better term! The banks will not only control our money but will control and own the majority of the homes people live in. A cartel can quickly be formed. Restrictions on movement between ‘rental providers’ will take time to be broken, if at all. Even when established, banks will be set to charge hefty administration and break clause fees at every opportunity. Who will have control over the companies that manage their assets? What fees will they charge to ensure their properties are properly mantained? The spiral winds deeper!

People who own their own homes with minimal debt and mortgage obligations are freer and less willing to be pushed around by government. You can see where this is heading.

"NeueArbeit Macht Frei", as 'Old Holborn' says...


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