UK Landlord Forum / Life

It was in the headlines this morning; Gordon Brown is scratching his head and thinking of ways to rescue the falling property market. His ideas...

* Shared-equity schemes for first-timer buyers, with loans of up to 30% offered by the Government and new-build developers.
   
* Mortgage rescue packages for families struggling with mortgage payments.
   
* more funding for social housing.


Hmmm...sounds neat. But what about trying to lower interest rates? That would help =/

I too am rather sceptical about these measures.

As I wrote in my latest newsletter to my community members

QuoteThe 'free' loans may help ease the deposit burden as long as this is done in close co-ordination with the Council of Mortgage Lenders (CML) who are increasingly fussy about where deposits come from as many of us know.

The shortening of the qualifying period for income support payments will again be of limited help as only certain people will qualify for income support in the first place.  It is a benefit based on income rather than outgoings so someone who has a reasonable salary but is now struggling due to rising mortgage costs will probably not be helped.

Bringing forward government spending to encourage social housing construction may also have little impact.  The building of social housing that forms part of larger developments is unlikely to increase - developers are cutting right back on new projects and are unlikely to forge ahead with projects just because they can get the cheapest units sold to Housing Associations.  Developments that comprise purely social housing may take years to complete given the amount of red tape that surrounds them.

As for lowering interest rates - that is no longer under Government control.  The Bank of England sets the base rate, but as we all know, the banks stopped using that as any kind of benchmark several months ago. 

I am not sure that this is a situation that the Government can legislate us out of.  Unfortunately, while we saw the benefit of sub-base rate mortgages and built our portfolios using them, those same rates were being offered to people who had no means of meeting even those low payments.  All that bad debt is washing around the banking system and the banks are playing pass the parcel in the dark at the moment - no one knows quite where those mortgages ended up and they don't want to get caught out when the music stops.  So until the banks start trusting each other again, and taking responsibility for their bad lending practices instead of taking out on their hapless victims, there will be a reluctance to offer credit across the board. 

Given that the 'boom time' rates we so long for were one facet of the crisis we are now in, I am not sure those days will ever return.

The Bank of England are free to set the baserate at any rate they see fit, to control inflation. However, from what I'm aware, the Government can step in. It happened in 92, when the Government increased the rates to 15% to try and protect the value of the Sterling.

At the moment, property is too expensive, no one is lending, and interest rates are too high. None of the solutions the Government have suggested will resolve either of those problems...

The only way it will be saved, is for it to do it on its own, its all down to other outside UK spends. USA to mention but one, and our own spending patterns over here, even if the Government put in a huge sum of cash, it may flick the market in the right direction but it will slow again for sure, as there intervention wont make us the people spend !.