Cost of renting a property goes up again

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    Drop in LHA really pushing those rents down then!

    Lee Fearon

    Don’t worry Beth. Dave has a Plan B which appears to involve encouraging first time buyers to purchase homes they can’t afford by ensuring that they only have to fork out for 5% deposit. Conveniently forgetting that banks shelling out loans to people who may not be able to afford to repay them, is part of the cause of the financial crisis currently engulfing Europe and the USA. Bit, the real beauty of the scheme is that that the banks may be able to share any loss caused by a downturn in the housing market with the taxpayer. (So the banks keep the gains in terms of the interest payable on the loans but are able to shoulder some of the losses onto you and I, should the property turn out to be worth less than they initially loaned out).

    Oh, and Dave has yet another another string to his bow. He’s considering increasing the Right To Buy discounts available to tenants of social housing. The new discount could be up to 50% of the value of the home. Someone needs to explain to me how this will solve the crisis caused by the shortage of afforable rented accommodation and simulataneously reduce the HB spend. Because in my experience, these properties will end up back on the rental market in the not too distant future at quadruple the rent currently being charged.


    One of the key factors in driving up rent levels seems to be the fact that as less and less first time buyers are unable to get on the first rung of the ladder, the demand for rented accomodation is ever increasing. Often the prohibitive factor preventing people, especially young professionals, entering the homeowner market is not the fact that they can’t afford the mortgage payments but that they can’t afford to save up the 15-20% deposits needed to get those mortgages. Indeed this is why landlords know that they can charge high rents as these people can actually afford to pay them.

    The issue with sub-prime lending was that money was “thrown” at people who had no realistic chance of affording the monthly payments that they entered into. This wasn’t such a problem for banks whilst house prices contiued to rise and rise, the banks happily re-possesed the properties and had an asset greater than the loan secured on it. However as soon as the house market began to stagnate and fall, this spelled big trouble for the banks. So the key is not the percentage of money that is lent to people but the circumstances of those people and their realistic prosects of meeting their monthly re-payments. If these relatively affluent people can be helped back onto the property ladder this may well relax the pressure on the rental sector and eventually see rents fall.

    The critics would point out however that the amount of money set aside for this deposit scheme is unfortunately a drop in the ocean.


    Increasing the demand side of the equation is not going to work. All that will happen is that house prices will rise again because there are more buyers in the market. In any case, these new mortgages are only going to be on new houses, as I understand it, which are hardly first time buyer territory down here in Chichester.

    John Boxall

    What about the huge rise in prices over the last few years.

    When I first moved to the town where I now live (Frome) you couild buy a decent family home for about £ just over three times my salary. Now you are looking at in the region of getting on for six times my salary – I’m still in much the same job and my earnings seem to hover around the national median male earnings.

    Housing is at the moment overpriced and if you are a potential first time buyer why tie yourself to a huge mortgage when either interest rates can only rise and house prices look like falling.

    Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and—and in short you are for ever floored.

    Wilkins Micawber, Ch12 David Copperfield


    Definately agree that if this approach is taken, it has to be done in conjuction with an increase in the supply side. I think the scheme is limited to first time buyers though, could be wrong


    Going back to the policy of selling off more council properties. Is the threat of forcing under-accommated social tenants to downsize a ploy to get more social tenants to buy their council home as they then wouldn’t have the fear that they may in the future lose their 3-bed property?

    Lee Fearon


    It’s a vicious circle. In the short term more homeowners means less people on HB. Unless of course they arer forced out of work during a recession, in which case their home will be re-possessed and they’ll be back on the rental market having to rely on HB. But this time saddled with a huge debt as the proceeds fron the sale of their former home won’t be sufficient to pay off their mortgage.

    As has been said, keeping house prices inflated is hardly likely to bring about a rerduction in rents

    But that’s not the only this problem with policy. As we all know we’re in a housing bubble where house prices ae ludicrously inflated. Offering to indemnify banks against possible losses should the bubble burst, only serves to preserve house prices at their current inflated rate. This actually excludes many who may be able to afford to purchase a home if houses were more sensibly priced.

    The big winners are the banks who will be allowed to collect the interest on the mortgages whilst being protected from the risk of a devaluation in house prices by the Government’s promise to use taxpayers money to offset some of the losses.

    And they said there was no money left.

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