UK must plan exit from housing schemes-industry groups (My Take)
According to a Yahoo article, fears of a new property bubble are fueled by the UK's down payment assistance program. Small deposits, or down payments as they are called here in the USA, drive so much demand that the prices of houses go up because of them.
Just like no down and liar loans in the US, small deposits and a previous program of self certified loans in the UK have driven up prices.
The self certified loans, which existed prior to the US liar loans, were, in essence, liar loans. No verification of income was needed. The UK has a rule that you cannot make less than 3 times the price of a home. Liar loans got around the rule.
The UK analysts are worried that you have either stimulus and a bubble or no stimulus and a crash. That is the reality of housing in the UK and USA, when too many people who cannot afford to buy with a traditional mortgage seek assistence.
Housing is doomed to be pushed by artificial means towards higher prices, all to help the banks and hurt main street in the long run.
Banks make money on house appreciation, and this can continue for quite some time. It becomes something that resembles a drug. The habit becomes harder and harder to kick, like QE in the United States. Stimulus is going to the wrong people in the wrong way.
Main street in these nations need help relieving debt not taking on additional debt. Too much debt at the consumer level is profit to the banks but saps the strength and purchasing power of the people.
Savings are replaced by debt as the fuel for the economy. This is very unhealthy, but not for the banks. It is all about the health of the big banks and yet real business suffers. These bubbles are not ultimately sustainable because fear of manipulation enters these markets.
Without the 20 percent down 30 year fixed mortgage, the housing market becomes unstable. Those solid loans that were the foundation of house buying in the last century are going away and make only a small portion of house buying today.
It is no surprise that house price volatility and danger for buyers increases as we see the demise of the 20 percent down mortgage.
Here is the truth about housing from here on out: There cannot be a real housing market with real price discovery. There is only a manipulated housing market with prices being continually controlled by the central banks and big lenders and their crony cash buyers. A real market for housing, based upon supply and demand and wealth of main street no longer exists!