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George Osborne Boosts UK Subprime Housing Market Ahead of Election Boom

Housing-Market / UK Housing Mar 20, 2013 - 05:42 PM GMT

By: Nadeem_Walayat


George Osborne announced a series of additional measures in along stream of give away's aimed at inflating the UK housing market the most significant of which is the policy of zero interest rates which artificially depresses UK interest rates as a consequence of inflationary Bank of England QE Money Printing to the tune of more than £500 billion to date.

Today's UK housing market boosting measures included -

  • An emergency £3 billion for infrastructure and house building to kick start growth.
  • Interest fee home equality loans of upto 20% of a deposit upto £120k to help people buy new build houses which means house hunters only need to find a 5% deposit for a LTV of 75%! i.e. £10,000 up front deposit to buy a £200k new build on an 75% LTV mortgage of 150k (note loan is interest free for 5 years).
  • The government will make available an £130 billion guarantee for new mortgages for properties upto £600k so that the banks will lend to more risky borrowers, i.e. those without deposits to buy any new or existing build. This effectively means creating new mortgage / property demand of upto 200,000 per year (not clear if this excludes buy to let 2nd homes).

The above measures are clearly aimed at ALL prospective property buyers / voters across the country, including London, therefore this IS a clear cut election bribe i.e. Vote Conservative because we are giving you £120,000 interest free for five years towards buying any house upto £600k!

Other indirect boosts to the economy were also announced such as helping small business with a £2,000 NI Cut, and canceling the 3p fuel duty rise.

Embryonic Bull Markets of 2012 Morphing into Bull Markets of 2013

If you have been reading my articles at the Market Oracle, then you will know that I have been flagging embryonic bull markets for the UK and US for virtually the whole of 2012 that I expect to accelerate into full blown bull markets during 2013.

06 Sep 2012 - Super Mario Draghi Triggers Stocks Stealth Bull Market Rallies to New Bull Market Highs

This years convergence towards housing market bottoms such as the UK and US presenting one of those once in a couple of decades opportunities to climb aboard what still are embryonic bull markets, just as I strongly suggested the birth of a new multi-year stocks stealth bull market in March 2009

Housing Market Trend Trajectory

Whilst I have yet to get around to concluding towards a detailed multi-year trend forecast for UK house prices, see my earlier detailed analysis and concluding trend forecast for the US Housing market as an approximate interim guide for trend trajectory - 12 Jan 2013 - U.S. Housing Real Estate Market House Prices Trend Forecast 2013 to 2016.

US House Prices Forecast 2013 to 2016

US House Prices Forecast Conclusion - As you read this, the embryonic nominal bull market of 2012 is morphing into a real terms bull market of 2013, with each subsequent year expected to result in an accelerating multi-year trend that will likely see average prices rise by over 30% by early 2016, which translates into a precise house prices forecast based on the most recent Case-Shiller House Price Index (CSXR) of 158.8 (Oct 2012 - released 26th Dec 2012) targeting a rise to 207 by early 2016 (+30.4%).

Creating a UK Subprime Housing Bubble

The chancellors announcement of £130 billion mortgage guarantees effectively amounts to seeking to ultimately create a UK version of U.S. Fannie Mae and Freddie Mac that will eventually blow up in spectacular style as more and more house buying voters expect to be bribed at each election and therefore the £130 billion will mushroom to one day stand at well over £1 trillion of liabilities, off course the bust will come AFTER the next housing boom, so this and the next government need not worry themselves for the consequences of creating a UK subprime housing bubble as the consequences of which tax payers will be liable for in a decade or so's time which means another financial crisis as this repeats the SAME mistakes of mortgage backed securities i.e. the lenders are not liable for the risks so can take on more risky loans for commission as the liabilities will be with tax payers.

George Osborne UK Housing Market Statement:

So this Budget makes a new offer to the aspiration nation. And what symbolises that more than the desire to own your own home.

Today I can announce Help to Buy.

The deposits demanded for a mortgage these days have put home ownership beyond the great majority who cannot turn to their parents for a contribution. That’s not just a blow to the most human of aspirations – it’s set back social mobility and it’s been hard for the construction industry. This Budget proposes to put that right – and put it right in a dramatic way.

Help to Buy has two components.

First, we’re going to commit £3.5bn of capital spending over the next three years to shared equity loans.

From the beginning of next month, we will offer an equity loan worth up to 20pc of the value of a new build home – to anyone looking to move up the housing ladder. You put down a 5pc deposit from your savings, and the government will loan you a further 20pc.

The loan is interest free for the first five years. It is repaid when the home is sold.

Previous help was only available to those who were first time buyers, and who had family incomes below £60,000. Now help is available to all buyers of newly built homes on all incomes. Available to anyone looking to get on or move up the housing ladder.

The only constraint will be that the home can’t be worth more than £600,000 – but this covers well over 90pc of all homes.

It’s a great deal for home buyers. It’s a great support for home builders. And because it’s a financial transaction, with the taxpayer making an investment and getting a return, it won’t hit our deficit.

The second part of Help to Buy is even bolder – and has not been seen before in this country.

We’re going to help families who want a mortgage for any home they’re buying, old or new, but who cannot begin to afford the kind of deposits being demanded today.

We will offer a new Mortgage Guarantee. This will be available to lenders to help them provide more mortgages to people who can’t afford a big deposit. These guaranteed mortgages will be available to all homeowners, subject to the usual checks on responsible lending. Using the government’s balance sheet to back these higher loan to value mortgages will dramatically increase their availability.

We’ve worked with some of the biggest mortgage lenders to get this right. And we’re offering guarantees sufficient to support £130 billion of mortgages. It will be available from start of 2014 – and run for three years. And a future Government would need the agreement of the Bank of England’s Financial Policy Committee if they wanted to extend it.

Help to Buy is a dramatic intervention to get our housing market moving: For newly built housing, Government will put up a fifth of the cost. And for anyone who can afford a mortgage but can’t afford a big deposit, our Mortgage Guarantee will help you buy your own home. That is a good use of this Government’s fiscal credibility.

In the Budget Book, we also set out more plans for housing: Plans to build 15,000 more affordable homes. Plans to increase fivefold the funds available for building for Rent. And plans to extend the Right to Buy so more tenants can buy their own home.

Meanwhile George Osborne literally choked on his budget as he tried to suppress the underlying truth of an ever expanding debt mountain as the government prints debt to bridge the unbridgeable gap between that of government spending and revenues that feeds the exponential inflation mega-trend.

The bottom line is this - At least George Osborne is trying to sort out Britain's economic mess, when those that created the mess, Labour's response is to tax businesses, borrow and spend on an unproductive public sector black hole which would BANKRUPT Britain! The big picture remains as I have iterated countless time's which is one an exponential inflation, for protection strategies see my latest ebook The Stocks Stealth Bull Market 2013 and Beyond (FREE DOWNLOAD).

Source :

Nadeem Walayat

Copyright © 2005-2013 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


20 May 13, 15:07
South-east and London housing markets

Hi Nadeem,

how long lived do you think Osborne's housing boost will be?

Currently, South-east and London housing markets are at the 2007 highs after a good 4 year bull-run.

Should a prospective buyer in those markets jump in and bite a bullet or wait till after the UK election?

I am specifically asking about London/SE markets as they are not in the same stage of the cycle as others, where the bottom was maybe end of 2012.

Thank you

20 May 13, 17:59
London housing boom


London leads, first to boom and first to end. I think its too early to think about an end to the boom, I suspect London has at least a good 4 years to run if not longer.



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