A mortgage, please?
Here's the challenge.
Go into a branch of Royal Bank of Scotland, taking with you today's announcement that it is making in Scotland, particularly available to first time buyers, and ask for your share of this lending bounty.
It is part of a £9bn package for the whole of the UK, so you can try the same at NatWest.
The government is eager to stress that this pot of money is a knock-on effect of its new capital injection, as part of the Asset Protection Scheme.
But this is a bank required to price risk more accurately than it has done before.
There is nowhere in the new lending announcement that commits this or any other bank to pricing its loans anywhere close to the 0.5% Bank of England base rate, or to limiting its arrangement fees.
So if you're a first-time buyer, asking for the maximum loan of 90% of value with only a 10% deposit, don't be surprised if the bank charges you handsomely for the risk involved.
Your new home, after all, stands a reasonable chance of falling in value by more than 10% in the next year.
So you and your bank manager can assume negative equity by then, meaning your asset will be worth less than your loan.
And if demand exceeds the £1.7bn? Well, there's more where that came from.
Indeed, it's hard to see how bankers can account for where this "new" lending starts and ends.
Bankers, politicians and house-builders hope this will help defrost the housing market, bringing forward the point at which falling prices find a floor.
But those of a more sceptical frame of mind might think it looks a bit like a useful device to send a more political message that the public are getting something in return for their vast investment.
Hullo, I'm Douglas Fraser, and I'm business and economy editor at ³ÉÈË¿ìÊÖ Scotland. Welcome to my blog, where you can read my take on money matters, viewed from a Scottish perspective.
Comment number 1.
At 11th Mar 2009, halfdeed wrote:I think this says it all....
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Comment number 2.
At 11th Mar 2009, Euromac wrote:Indeed.
the banks have seemingly zero interest in encouraging lending, only in making sure that thsoe who do lend are over a barrel.
On the day after the BofE reduced interest rates to 0.5%, Egg (part of Citibank) decided to raise interest rates for EXISTING credit card holders by 25 - 30%. It is interesting to note that they had not passed on any earlier rates cuts either.
So, we now have the situation where a 'normal' credit card company, run by a normal banking group, can legally charge 50x base rate.
I think the name for that is loan-sharking. Or dishonesty. Or something similar. If the government really wanted to step away from their failed 'light touch' regulation, they would start with this type of behaviour
Either way, it just goes to show that the banks want first to cover their a***s with your taxpayer cash, and s***w at the same time. They don't see any moral obligation to help, just to profit.
One more reason not to give them any more money
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Comment number 3.
At 11th Mar 2009, kaybraes wrote:More nonsense from a government totally devoid of any idea how to repair the economy they have destroyed. Who in their right mind would borrow money at an exorbitant rate of interest to buy a property that will be worth at least 10% less in tvelve months time once the recession really lets rip. No bank either is going to take a risk on someone who is dumb enough to buy property in a falling market. Maybe in 2 years time when and if the property market bottoms out it might be worth buying. By that time however the excesses of this dreadful government will be in the process of being paid for and the rate of taxation may not leave much money around for buying property.
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Comment number 4.
At 11th Mar 2009, freedjmac wrote:Douglas,
Your post points out just how much the humble mortgage-seeker is in the dark, as well as a number of other things!
Can we ask, just what is the role of the 'dead hand' of government in this?
What rates of costs and revenues has the government actually sanctioned?
In that the Government effectively 'owns' the bank, surely it has set parameters in which 'its' bank can operate and, therefore, charges be set??
The housing market is very very weak and needs much more than this. I picked up a copy of today's 'Herald' and I would reckon house sale ads are running about 25% of normal!! (I say this because I advertised my own house three years ago at this time and the thickness of the 'Herald' property supplement was then substantial, as opposed to today's minimalist offering!)
Just where does this 'dead hand of government begin and end' in this matter Douglas??
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