That’s not a first home owner grant!

This is a first home buyer grant. From the UK Telegraph:

[A] controversial new mortgage deal is being launched by five local authorities and backed by Lloyds Banking Group, one of the lenders bailed out by the taxpayer during the credit crisis.

The scheme is aimed at struggling first-time buyers who are unable to afford the large deposits required by lenders concerned about borrowers defaulting on their home loans.

It has echoes of the housing boom in the run up to the credit crisis when banks not only approved mortgages to those without a deposit, but even lent more than the value of the property.

Experts warned lenders’ efforts to offer innovative new deals to help first-time buyers could backfire if house prices fall.

Under the scheme, if house prices fall and the property is repossessed, the money invested by the local authority could be lost.

Drew Wotherspoon, of mortgage brokers John Charcol, said: “Any scheme that looks to help the beleaguered first-time buyer is welcome, but the detail of this one looks a little odd. At a time where cuts are coming left, right and centre, and public sector jobs are falling like dominoes, using tax payers’ money to help people on the housing ladder seems wrong. If house prices do fall over the coming years then it seems the taxpayer will be out of pocket. That will be unpopular to say the very least.”

Under the scheme, a buyer could potentially purchase a home for £350,000 with a 20 per cent deposit from their local council of £70,000 and a 5 per cent deposit from their own savings.

Together, this would provide the 25 per cent deposit required by lenders to secure a preferential rate on their mortgage.

No need to adjust the TV set. You read it right. SEVENTY THOUSAND  POUNDS. Even at today’s super powered Aussie exchange rate, that’s $112,704 for free, to kill your grandmother. Sorry, I mean, buy a house.

To be honest, I can’t say anything to top the figure.

I’ll close by adding that despite the unparalleled largesse, the stock of UK housing on sale is rising very fast and prices are set to resume their fall.

Unconventional Economist


  1. As a former Australian resident now living in the UK, I have to admit this enrages me.

    We just seem unable to come to terms with the basic fact that the reason first home buyers can’t get on the “ladder” is simply that houses have become too expensive. So, it has to be a problem of insufficient credit.


  2. I can understand councils making stupid decisions – thats part of their charter – but I can’t understand why councils think it is important for young people to own a home as distinct from anyone else. As long as someone owns it and pays their rates what concern is it to them?
    BTW I thought all councils were broke – where does 70,000GBPs come from?

    • If we go by the records of our own local councils, the UK councils probably have plenty of extra cash left, even after investments in toxic subprime CDOs. NOT

    • “why councils think it is important for young people to own a home as distinct from anyone else.”
      Maybe Moodys has started giving out AAA+ ratings to young people? 🙂

      • Hadn’t thought of that – there is more potential to milk then for longer. Everyone wants a longtime loyal customer

  3. The councils involved in this scheme are in the north of England and Scotland where house prices have fallen more than in the south – generally speaking. They are trying to reinflate those housing markets and its speculation because the opposing forces on prices will drag it back. Ratepayers in those councils should sell up and leave.

  4. UK Budget that was handed down the other day continues generous FHOGs for those buying off-the-plan as well to help the young get on the housing ladder (and presumably fall off it and break their legs).

    Interesting where priorities lies – while the UK shuts down libraries and forces low-income owners out of London – they are happy to continue to prop up the construction industry.

    • Massive cutbacks to education and social services since the Tories took over yet plenty of money to ensure housing bubbles keep going. Charming.

  5. Oopsie – better tell Joye about this one: looks like they stole his equity finance “idea”.

    It’s amazing isn’t it?

    There are 2 easy solutions to make houses cheap for first home buyers.

    1. Tighten credit standards
    2. Make new supply responsive

    Its not rocket surgery, but we seem to want to do the opposite (loosen standards until there are none, and put as many barriers in the way of releasing cheap land and building cheap houses) and expect the same result.

    I remember somewhere some guy some time said that was insanity. (doing the same thing and expecting a different result)

  6. Not all it may appear

    “Under the £250m scheme, known as the FirstBuy programme, buyers are required to provide a 5 per cent deposit, with 20 per cent injected by the government and the house builder in the form of a low-interest equity loan.
    The scheme is limited to new building properties, restricting buyers to where they can live.
    The funding will also only stretch to 10,000 first-time buyers, which is equivalent to just 5 per cent of all first-time buyers last year.”

    Read here:

    Comments are interesting too, the Government are desperate to SLOW the falling market, they have not forgotten the wilderness years courtesy of the 1990 property crash, and ensuing recession.

    Truth is they don’t really have the money for anything as widespread as the FHBG here.

    • Actually they do have the money, just as our government as the money to double, triple, quintuple the FHVB at any time.

      Remember, the UK is not part of the Euro so they can print Pound (I won’t call it Pound Sterling!!!!) whenever they like, just like our government can print AUD whenever and in whatever quantity they like.

      That’s a factual, amoral position, not an ideological one.

      • Well, yeah but no but…maybe I mean wealth.

        I suppose a large part of the hidden destruction of house prices in the UK has not been nominal, but rather the withering devaluation of Sterling.

        I suppose they can carry on in what ever manner they wish, the final result says the same in nature if not name.

        At the moment, the UK government does not have the luxury of any booming resource sector to screw over. Cuts!, cuts! and more cuts is the mantra, and wasting money won’t be popular.

  7. “taxpayers to foot the bill” … so if you won’t buy houses, the government will buy them on your behalf! Nice.

    The world does have some big problems. I’m starting to think that they are even bigger than I’ve imagined. However, these “solutions” are madness on top of madness.

  8. Shhhh! Don’t tell our government – they’re likely to bring in something equally as stupid.

    • In all seriousness Aussie Renter – what do you and others think the government(s) could do in response/during a housing bubble crash – or worse – a deflation?

      Steve Keen was shocked when the FHVB was introduced, and then there were the instances of State Gov’ts propping up the market by using stamp duty relief and other incentives.

      Given that the State govt’s are revenue restrained (and theoretically, but not politically the Federal’s are not), what are the likely props/mechanisms that could be used?

      Going to ZIRP isn’t going to be the only answer, and is not a solution either. Going households with more $900 (or $9000) cheques may be on the cards too, who knows?

      • “Steve Keen was shocked when the FHVB was introduced, ”

        Was he really? It didn’t stop him making his bet with Rory AFTER the FHVB was announced.

  9. industry is so desperate to get public money to plug the hole- be it superfunds, FHBG, bailout, zero interest “liquidity”, anything goes!