They told the banks to lend more carefully and are surprised when they do just that.

I'm not sure if it will impact green building any more than general building though.

Probably true: The idea some years back was that all new housing would be greener than existing stock.

It'll shore up prices for a bit, but then the government will be left with the stark choice of either putting more money in or finding other ways to keep prices high. Preventing new development of housing is an easy step to take and will have lots of 'nimby' support (though it will perhaps be difficult to explain to younger people)

So bad news for the whole industry, or do you see a glimmer of light that I've missed?

I agree with that Ed, but the Treasury is a very powerful department.

Sometimes lack of joined-up thinking is a good thing.

What's the good thing you see about the Treasury's scheme Ed?

Posted By: CWattersThey told the banks to lend more carefully and are surprised when they do just that.

Did they though? I thought the banks stopped lending of their own accord when everything went belly up because of them and lax regulations. Then the bank of England has been shovelling them free money in the hope that they'll start lending again, which the banks have instead used to invest and line their own pockets with the returns.

Sounds like an appalling idea to me. A large part of the crash and recession was down to bad debt, over leveraged borrowers and inflated house prices caused by easy access to larger mortgages at reduced deposit ( if any), and of course falling supply and growing demand.

see the quote on the web page:

"The maximum home value will be £600,000 and there will be no income cap constraint
ensure that the scheme is open not only to first time buyers but also to all those looking to move up the housing ladder."

So lets understand this, they're going to underwrite anyone wanting a house up to £600,000, never mind what they earn/ worth. In my eyes this is just going to help towards creating another housing bubble learning nothing from the last crash!!? I suppose its only a side note that it will help stop house prices falling and therefore allow existing house owners to sell on at profit and protect those with large property portfolios...this looks like like just another short term vision band aid, ignoring the route and cause of the problems, the cynic in me would almost think this is an attempt to bribe voters for the next election!!

Rather than lend this £3.5 billion to prop up house prices how about they use it to build I dont know, 24,000 new homes instead? ( 3.5 billion / £150,000 I think!!!?)

The lack of joined upness is good, though, as it makes any motivation the Treasury might have to have a negative influence on new build be less likely to affect planning or other regulation which actually would have an effect.

But surely the Treasury will eventually realise that it's in their interest to stop new housing developments from happening? (so they are unlikely to want to provide funds to enable new housing programs to get off the ground)

I know there's been no joined up thinking with all this, but there's some very intelligent people in the Treasury; I wouldn't have thought that it would take them long to realise.

The Treasury can withdraw funding from this or similar schemes but there's little else they can do directly - their interaction with the people setting planning rules, for example, is likely as indirect as anybody elses.

Probably right, unless the people setting planning rules suddenly find that, due to austerity measures, they don't get any funding to set any changes to planning rules. I'm probably being a bit too cynical about this.

Boosting prices by this method is the stupidest thing out, and is a tremendous drain of government resources. A short term "fix".

What they should be doing is lending the money out to self builders and making appropriate sites available for development. A lot of self build schemes have been massive successes with better houses at lower costs than developers can turn them out for, more settled communities to boot. No artificial propping up of the market necessary.

"Much of the original irresponsible lending took place in the USA but UK banks got involved by buying Collateralized Debt Obligations."

Yes, this was by lending to people who couldn’t afford to buy a home.

By comparison, the current plan is to:

"You may be able to get financial help through a Help to Buy home ownership scheme if you live in England and can’t afford to buy a home."

https://www.gov.uk/affordable-home-ownership-schemes/overview

Seems to me (the Help to Buy equity loan part, not so much the rest) like a plan guaranteed to get the Treasury into financial difficulty: If this happens, the only cheap response I can see is for them to then advocate cutting the supply of new homes.

"Just had a quick look for average house prices, the BBC website came up top.
Average house price is a nats under £239,000."

True, but that will be one of the (various) average asking price figures. The average selling price is £162,621. Henry Prior has been logging this for a bit:

https://twitter.com/HenryPryor/status/360685338693365760/photo/1

Though the scheme is only small relative to the market, it's a big sum of money: When interest rates do kick in, the differential will close. What worries me is that the last tranche of the scheme (the stuff coming in January 2014) will then show up as direct loss on the Treasury's books.

So the building industry gets a short boost from it, but as soon as the USA reverts to normal rates, a strategic response by the Treasury could be to prevent new housebuilding.

We should really be finding ways to lower property prices..

Yes but the problem is how to lower prices without having falling prices. If prices are falling nobody will buy, banks won't lend such a large LTV, people will be stuck with negative equity, loss of confidence in general will drag the economy down. People don't spend on other things if they think they are loosing bucket loads of money on their house.

What we need is static prices for decades so that inflation has the same effect but without the pain. The problem with that is the cost of building new houses also needs to be static. Perhaps what we really need is investment/research into radical new construction methods?