FTB loan scheme could cause US-style problems in the UK

Regarding the government\'s mortgage rescue plan, no-one has explained who will be liable for the 30% HomeBuy loans. It looks like they are effectively second mortgages.

So who will be liable if the houses purchased fall into negative equity? If the properties are sold for less than the amount borrowed, who will take on the deficits? Will they be covered by indemnity insurance?

The success of the scheme hinges entirely on the assumption that house prices will rise in the future. What happens if they don’t?

The government is effectively encouraging novice house buyers to take on second mortgages for their first homes in the midst of one of the most hostile property environments seen for decades.

Why? To stimulate the market, of course. So all young consumers gazing excitedly at their first properties are simply pawns in a game designed by the government to pursue economic growth – and it is using our hard-earned tax to pay for it.

In the 1980s when my property fell in value by 30% and was dangerously close to negative equity, no-one picked up the tab or offered me interest-free borrowing to ease the pain.

Look across the pond and see what happened when Fanny Mae underwrote 100% LTV first-time buyer mortgages. It’s not a pretty sight. The mortgage rescue plan proves that we are being ruled by buffoons.

Justin Thomas

Thomas Hall IFA
By email