Money for nothing, and your house for free

Fancy a free house? Who wouldn't...

Well under a new plan announced yesterday by the two wallies pictured above, that exactly what you can expect to get if you play your cards right.

After a lot of consideration (really? Who'da thought it?...), the government has decided that the best way to tackle the crisis in housing caused by reckless lending is to encourage a return to reckless lending.

The problem is apparently that builders are not building houses on land they already own because the banks won't lend them the money they need to fund the build. So the government will put tax payers money into building projects to be repaid once the properties are sold. This is of course assuming that the properties are ever sold, because we have just given the builders every incentive to not bother selling their properties. After all, they already have the money, so why bother?

The other problem is that first time buyers can't get mortgages because the deposits they have to find are too high. The government will solve this by incentivising the banks to lend 95% mortgages again, underwriting the risk with our taxes.

Now I have every sympathy for people who quite rightly point out that the mortgage they would be paying is actually lower than the rent they are already paying. These people are clearly not a bad risk and should be able to raise mortgages. Sensible banking policy would solve this problem. But where's the incentive been for sensible banking policy? There's no profit in it...

And what's going to happen when interest rates rise again - as they inevitably will - and the repayments rise beyond people's ability to pay? Well, the government will likely bung 'em a bit more of our cash, I expect.

This new policy is a reflection of the desperation of the government to get the economy moving. They say it will produce 32,000 new jobs in the building industry. What they forget is that most of these jobs will go to economic migrants from EU countries like Poland who will be quick to jump on the building bandwagon as soon as it starts rolling again. Just as quick as they were to go home when building stopped. OK, we'll get some taxes out of it but let's not kid ourselves that it will reduce unemployment. Brits are basically slow to get their hands dirty in the building trade

We are told that the UK needs to build hundreds of thousands of new homes to address the 'chronic housing shortage'. I don't buy this argument. The UK is fast on the road to becoming the most densely populated country in Europe. We are filling up fast. If the people who aren't supposed to be here were sent home and we weren't being flooded by uncontrolled immigration, then we wouldn't need to pave over our country.

Yes, we need sensible lending to enable responsible people to buy homes. What we don't need is some half-arsed government kneejerk reaction which will result in people having no incentive to make the repayments because the government will guarantee the default. That's no way to proceed.