There is a saying that “if you do what you have always done, you will get what you have always got”.
It seems that the Government hasn’t noticed that we are in a financial mess brought about in the main by our borrowing money mostly to buy houses that we can’t afford. So what do they do? They make it easier to buy homes and build up more debt. The mind boggles, well mine does anyway.
House prices on average have fallen by around 10% over the last year. If you bought a house in the expectation that it’s value would increase above inflation indefinitely you’re in trouble or could be. If you bought your house as a home to live in then apart from a likely rise in the mortgage rate, you’re OK. Housing values falling back to a more realistic level is a good thing bringing some sanity back into the market. Today’s announcements of stopping Stamp Duty for twelve months, interest free loans for five years on new houses will indeed stimulate in some degree the building industry and the housing market. It will also reinvigorate the rise in house prices and back on the treadmill we go. In addition ‘rescuing’ defaulting home buyers by local authorities part buying their homes and renting that part back to them only serves to trap the occupants in debt.
Yes people need homes and yes, the building industry needs stimulation particularly as so many other industries depend on it’s activity. The huge sums of money that Government is about spend is a short term, short sighted, fix and will, in the long term be largley wasted. This money should be spent by building homes for rent (see) and thus adding the same stimulation to the builders, providing homes and thereby avoiding yet another debt spiral resulting in yet another ‘credit crunch.’