Thats not a grant, this is a grant!

[Bernard L. Madoff 14]

First-home buyers in parts of Britain are being offered deposits of as much as 70,000 pounds ($113,000) by their local council to help them get on the property ladder, with taxpayers footing the bill if house prices fall.

The controversial new mortgage deal is being launched by five local authorities and backed by Lloyds Banking Group, one of the lenders bailed out by UK taxpayers during the credit crisis.

The scheme is aimed at struggling first-home buyers who are unable to afford the large deposits required by lenders concerned about borrowers defaulting on their loans.

Advertisement: Story continues below It has echoes of the housing boom in the run up to the credit crisis when banks not only approved mortgages to those without a deposit, but even lent more than the value of the property.

Experts warned lenders' efforts to offer innovative new deals to help first-time buyers could backfire if house prices fall.

Under the scheme, if house prices fall and the property is repossessed, the money invested by the local authority could be lost.

Drew Wotherspoon, of mortgage brokers John Charcol, said: “Any scheme that looks to help the beleaguered first-time buyer is welcome, but the detail of this one looks a little odd. At a time where cuts are coming left, right and centre, and public sector jobs are falling like dominoes, using taxpayers' money to help people on the housing ladder seems wrong. If house prices do fall over the coming years then it seems the taxpayer will be out of pocket. That will be unpopular to say the very least.”

http://www.smh.com.au/business/world-business/uk-home-buyers-offered-cash-splash-to-enter-market-20110317-1bxuf.html

[tom 20]

http://www.smh.com.au/business/world-business/uk-home-buyers-offered-cash-splash-to-enter-market-20110317-1bxuf.html

That sounds more like a second loan?

With ours the government is out of pocket whether property goes up, down or sideways. They give the money away in the first instance.

[Charles Bukowski 34]

That sounds more like a second loan?

With ours the government is out of pocket whether property goes up, down or sideways. They give the money away in the first instance.

Is it a bit like how in WA they had the "shared equity" scheme of up to 40% (and axed it a few days after Steve Keen was on the air in 2008).

[tom 20]

Is it a bit like how in WA they had the "shared equity" scheme of up to 40% (and axed it a few days after Steve Keen was on the air in 2008).

No rather than shared equity it appears to just be another loan with less recourse than the primary loan from the bank. i.e. a loan which enables the bank to fund the purchase.

If they know 70k is being chippied in from elsewhere that is 70k more buffer on the loan asset. i.e. more equity in the collateral.

[zaph 43]

That sounds more like a second loan?

With ours the government is out of pocket whether property goes up, down or sideways. They give the money away in the first instance.

yes it appears that you have to come up with 5%. banks will only lend max 75%, the other 20% is underwritten by the council.

[zaph 43]

Helping people to buy their first home is crucial in achieving and maintaining a sustainable housing market.

how's it sustainable if the govt needs to provide assistance?

[tom 20]

how's it sustainable if the govt needs to provide assistance?

Well in theory they could increase taxes elsewhere so that the housing market can permanantly be subsidised by the rest of the economy.

This is pretty well how we have kept the show going this long in Australia in my opinion.

We are just waiting for either the government to change its mind or the government to have more pressing matters to attend to with its revenue.

Otherwise I expect another FHOGB or some other form of subsidy pretty soon as it is getting pretty dire! Once the states cannot be sustainable due to dropping stamp duties etc the federal gov will think about doing this. I hope they don't but suspect that they will..

[zaph 43]

Well in theory they could increase taxes elsewhere so that the housing market can permanantly be subsidised by the rest of the economy.

This is pretty well how we have kept the show going this long in Australia in my opinion.

We are just waiting for either the government to change its mind or the government to have more pressing matters to attend to with its revenue.

Otherwise I expect another FHOGB or some other form of subsidy pretty soon as it is getting pretty dire! Once the states cannot be sustainable due to dropping stamp duties etc the federal gov will think about doing this. I hope they don't but suspect that they will..

I don't think there is political will for another boost. I suspect they will take the UK lead with a cheap loan or underwriting. maybe a 15% deposit up to 70k at 4% repayable over 10 years.

[Chimerica 2]

The UK deserves to go down the toilet if this is the case. Unbelievable.

[tor 94]

Well in theory they could increase taxes elsewhere so that the housing market can permanantly be subsidised by the rest of the economy.

This is pretty well how we have kept the show going this long in Australia in my opinion.

Haven't all taxes been dropping by percentage since the late 90's?

I can't think of any that increased _during_ the house boom.

[savagegoose 26]

thatt is freeking insane

[tom 20]

Haven't all taxes been dropping by percentage since the late 90's?

I can't think of any that increased _during_ the house boom.

Well Stamp duty only due to the market in dollar volumes increasing in size.

The GST.

State development levies and council levies.

Those are all specific to housing. (Edit: sorry gst is in new homes but of course on most other things too.)

Others I can think of, the minings tax, tax on ciggerettes, land tax on homes other than the PPOR.

Then there are others disguised as other things like Tollways and the like, a pay per use if you like but really it is a service of the state now being charged for.

HECS fees for students.

these are ones I can think of off hand? There are likely plenty more.

I don't think that was the crux of what you were saying anyway though. Now all taxes in proportion to GDP probably have dropped? I don't know.

However a single market can become sustainable if the government subsidise it or manipulate it. You may remember from school economics the Russian chandalier factory which made 1tonne chandeliers. While no one would buy them while the state encouraged the production of same they went on producing them. Also the nail factory that only made railway spikes because again they got paid by the tonne.

So in Australia the government taxing us and then funnelling money into a certain sector will see that sector operate differently to what might be rational in the rest of the economy. If said subsidy is increased further I think we have to be realistic ourselves and understand of course it can make it sustainable so long as said manipulation is taking place. Who knows in 2050 Australians may put all our excess capacity into funding the housing market stupidity? It really is just a question of how insane can our government be?

I suspect though as the negative drag of the debt effect starts to grow larger than the positive boost of the wealth effect on our economic activity the questions will start to be asked around whether having an economy based on asset price appreciation is really such a good idea. I hope the questions are asked before 2050 is all....

[savagegoose 26]

smoking drinking and speeding while actually going the same speed as earlier, ie 60 zones now 50 zones. all taxes that have gone up.