Yeah, was gonna mention this.
So, comes in in March...right when the banks end their mortgage holidays...and they create a new bunch of people that are now eligible to get loans, boosting demand even amidst a horrible economy.
Looks like I might have to pull back on that 20% downturn prediction.
Well done, government. Well done.
Mind you, it's a terrible move. Saddling people who can't afford debt with the biggest debt they'll ever have just to kick the housing can down the road is atrocious. But, I did say that the government does not want to be the one responsible for overseeing the collapse of the housing market, so this is no surprise.
The variable in this is that it'll apply to all forms of credit, obviously the government is planning on a ( continuing ) credit binge to kick start economic growth. So I'm not quite sure the majority of the focus is on housing, but without doubt it is kicking the can down the road.
The downside is the potential for an explosion in consumer credit, funding lifestyle and depreciating assets like large TV's and cars. That'll certainly boost economic growth, but it also chews into disposable incomes. Watch for the stories of mortgage stress where the people involved are interviewed in an oversized home with a double garage with cars parked out the front , and full of the latest gadgets, they'll become even more common place. We can't help ourselves.
What this policy does is formally legalise the cowboy like behaviours of the finance system that existed prior to RC, and simultaneously allow for the transfer of government debt to the private sector through credit driven growth. Whilst it may well "work", it'll also leave us more exposed to the next disaster, far more so than the myth of deficits doing so ever will.