There are several pragmatic steps the Chancellor is using to stimulate the housing market. Firstly, they are offering 20% towards the deposit for buyers looking to purchase a new house. Secondly, they will look to provide £12 bn in mortgage guarantees.
Why all this effort
All this money is being pumped in because the government are keen to prevent the housing market falling backwards risking a Japanese long term slump in property prices. Deflating housing prices would have a catastrophic impact on the balance sheet of our British banks of which we the tax payer largely own.
Meddling in the housing market
I don't agree with meddling in the housing market. Who remembers MIRAS? A subsidy for buying your own home which distorted the market and meant that landlords were at a significant disadvantage against home buyers receiving a large subsidy on their mortgage payments. Again the proposed subsidies are not available to landlords putting us at an immediate disadvantage. How many of us would appreciate being able to borrow 95% of the value of an investment property?
Landlord benefit
If the Chancellor is successful in engineering a mini boom in UK house prices then landlords certainly stand to gain in terms of inflating portfolio values. However, the budget does indicate one thing about politicians views on landlords. We are still very much second class citizens and yet again have been left out when the begging bowl marked 'incentives' was passed round after the Budget party.
Landlord insurance - trusted brokers
The Government is also looking out for the big house builders, who own huge stocks of consented land which are presently supporting their balance sheets. Any % decline in property prices leads to an even greater % decline in land prices, and could make the builders insolvent - and leave the banks with massive bad debts as you point out. This may be one reason why the Govt is not unhappy to allow inflation to rise.
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