Thursday, 5 April 2012

Mortgage fears cloud right-to-buy relaunch

The "dream of home ownership" is exactly the carrot dangled by successive governments to get people into back-breaking amounts of debt.  

This government is even worse because is constantly pushing people into assuming ever higher debts when the households already have more than 100% of GDP to pay back.  To use taxpayers' money to stimulate an overinflated housing market is not only incompetence, is recklessness.

Instead of making it "easier" for people to get on the housing ladder the gov should invest in building lots and lots and lots of new homes.  This ladder is to high and steep and therefore dangerous for so many.  Instead of forcing people up, more ladders at various slopes and step heights need to be offered.

Let's not forget that Ms Thatcher sold very well the "freedom" to own a house.  Not only the rich can have a house, the servants can too.  But can they?  Does the bottom 80% of the UK population afford a house within 60 min commuting time to their working place and within 30 min of a good school, large enough to accommodate a 4 member family, and are they able to save 10% of their net income after they paid all their bills?  

Mr Cameron wants to repeat the trick: 
1) create scarcity: let's hold onto our land positions, and not allow anything to be built on it, only thus the price per sqm will continue to rise
2) create demand: tell people they must own a house, no matter what it costs
3) give them credit: use taxpayers money and regulation to give people an incentive to sign up for a mortgage.  How and when they'll pay it back is THEIR problem.

The low and middle classes were led by the nose into the ownership myth, which to a large degree is nothing but velvet-covered handcuffs.


The ambitious scale of David Cameron’s relaunched “Right to Buy” scheme is in doubt amid fears that many council tenants will struggle to obtain mortgages to buy their homes in the wake of the credit crunch.
Ministers have suggested millions of social tenants will be able to get on to the housing ladder under the new scheme, which increases the discount available to potential buyers to a maximum of £75,000.





But only a “small proportion” of these will be able to obtain a mortgage given that fewer than 20 per cent of council tenants are in full-time employment, according to Richard Donnell, head of research at property research firm Hometrack.
Banks have tightened their lending criteria since the financial crash of four years ago. The Financial Services Authority’s mortgage market review last December highlighted right-to-buy customers as the most likely to experience arrears or repossession, making banks less likely to lend to them.
Hometrack also predicted that only a handful of people would benefit in London, where house prices are so high that even a discount of £75,000 would leave social housing out of the reach of tenants.
“In London the discount required to make RTB affordable is as high as 58 per cent or £128,000,” said Mr Donnell.
In other regions, the discount would bring houses within the price range of many council tenants – if they can raise a mortgage.
Mr Cameron, the prime minister, said on Tuesday he wanted many more people to “achieve the dream of home ownership”, echoing the wave of purchases in the 1980s.
The right-to-buy scheme “gave something back to families who worked hard, paid their rent and played by the rules,” he said. “It gave people a sense of pride and ownership.”
However, Jack Dromey, Labour’s housing spokesman, said: “Labour supports those who want to buy their own home. But with rising unemployment and an unprecedented squeeze on family incomes, many families will struggle to buy a council house even with the discount.”
Since Margaret Thatcher launched the scheme – which drew heavy criticism for reducing the amount of available social housing – in the 1980s some 2m council homes were bought by tenants. But the trend has slowed to almost nothing with just 4,000 sales last year – mainly because councils were offering such small discounts.
The new discount rate gives those who have lived in a property for five years 35 per cent off the sale price, with an extra 1 per cent for each year they have lived in the home – up to a maximum of 60 per cent. This figure cannot exceed a cap of £75,000.
Ministers said any new wave of sales would not deplete the stock of social housing because each sale could be replaced with a new-build home following a relaxation of rules that had capped social rents. Councils will be able to build new homes using the sale proceeds and by borrowing more against their higher income stream.
Mr Donnell estimated that on average 1.4 right-to-buy sales would be needed to fund each new home, however, unless rents rose to the new maximum of 80 per cent of market rates. Most housing associations were limiting rents to 60 per cent of this, he estimated.
The National Housing Federation said it wanted the proceeds of sales reinvested within a set timeframe: “With 4.5m people on waiting lists, it is crucial the scheme replaces the homes sold, one-for-one, as soon as possible,” he said.

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