Interesting Links for 06-03-2012
- Replacing Trident makes no sense
(tags: nuclearweapons politics uk ) - New mortgage scheme gets go-ahead in Scotland.
I'm not convinced by this - the reason the banks want a large deposit is in case the prices fall. If this happens then the government will be left in debt.
(tags: housing mortgages scotland ) - Did you ever read Goats? Would you ( Read more... )
So in the event of the mortgage holders not being able to make their repayments and the cash price of the home having fallen we, through the government, take the hit.
One the one hand, one might ask why the government is protecting private lenders from losses on their lending. You might also worry about taxpayers being left to pick up the cost of providing subsidies mortgages to relatively well off people i.e. we are guaranteeing the loans of people with jobs and not providing social housing directly to those not in employment.
On the other hand, this might be a cheap way of providing a Keynsian boost to the economy.
My usual back of a spreadsheet useful only as a contextual starting point number crunching follows.
Say average cost of a new build house is £100k. The scheme aims to help 6,000 borrowers buying new build housing. Be generous and assume that that housing would not have been built but for the scheme.
That’s £600m of house building over the next few years.
The direct cost of the scheme would be any guarantees the government has to pay out.
Assuming £600 mn of loans guaranteed for the first 25% of capital losses is £150m of guarantees. With a 1% delinquency rate the direct cost to the government is going to be about £1.5m spread over a couple of years.
The next point is slightly off because the Scottish government doesn’t collect income tax or pay social security but there would also be the net gain of switching some builders’ labourers from unemployment benefit to waged employment, probably paying a little bit of income tax.
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