You will have to make an appointment for consultation. He charges on hourly basis now 
LOL. FP jan I will give you a 99% split. Anyway here is a couple of articles that sum up the volume & activity but there is more to it. read this for now & I will bring you up todate.
Rush to refinance mortgages spurring delays
[COLOR=#999999! important]By Dina ElBoghdady
January 16, 2009 [/COLOR]
Reporting from Washington -- Borrowers are rushing to refinance their mortgages at record low interest rates but face unexpected delays as swamped lenders struggle to cope with the surge at a time when layoffs have sharply cut staffing.
Bank of America Corp., which started shedding 7,500 employees after its July merger with Countrywide Financial Corp., recently yanked 300 workers from its home equity line department to help deal with refinancing requests, said Matt Vernon, the bank's national sales executive.
Some borrowers have been told they would have to wait two weeks for a call back from their lenders, said Joy Siegel, a Bethesda, Md., real estate lawyer. "That's incredible considering rates sometimes change on an hour-by-hour basis," she said.
Given the jam, Wells Fargo no longer allows its loan officers to lock in rates for less than 90 days so there's enough time to close the loans, said Bill Malkoun, branch manager at Prosperity Mortgage, a joint venture of Wells Fargo and Long & Foster.
"It's as if the entire nation woke up one morning and decided they all wanted to refinance at the same time," Malkoun said. "Sometimes I pick up one message, return that call and then find four more waiting."
Refinancing activity took off after Nov. 25, when the Federal Reserve announced it would buy mortgage-backed securities to help loosen consumer lending. Mortgage rates immediately plummeted well below 6%, breaking a psychological barrier. Refinance applications have soared each week since, though they tapered off around New Year's Day.
Bank of America and other lenders said activity had rebounded to preholiday levels as rates continued to decline. This week, the average for 30-year, fixed-rate mortgages dropped below 5% for the first time since Freddie Mac began keeping records in 1971.
With all the refinancing buzz, Ron Gross of North Bethesda, Md., expected to snag a great rate when he called his lender, CitiMortgage. Instead, he got a recording saying that because of heavy call volume, his call could not be answered. "I couldn't even leave a message."
Susan Cecala of Falls Church, Va., said she, too, could not break through the automated message systems or voice mails. She called two lenders and two mortgage brokers, who act as liaisons between lenders and borrowers.
"Bank of America even sent me something in the mail inviting me to refinance with them, and when I called, they referred me to apply on the Web," she said. "I never did hear from them. Isn't that strange?"
Finally, a friend referred her to a broker who helped her.
ElBoghdady writes for the Washington Post.
Rush to refinance mortgages spurring delays
[COLOR=#999999! important]By Dina ElBoghdady
January 16, 2009 [/COLOR]
Reporting from Washington -- Borrowers are rushing to refinance their mortgages at record low interest rates but face unexpected delays as swamped lenders struggle to cope with the surge at a time when layoffs have sharply cut staffing.
Bank of America Corp., which started shedding 7,500 employees after its July merger with Countrywide Financial Corp., recently yanked 300 workers from its home equity line department to help deal with refinancing requests, said Matt Vernon, the bank's national sales executive.
Some borrowers have been told they would have to wait two weeks for a call back from their lenders, said Joy Siegel, a Bethesda, Md., real estate lawyer. "That's incredible considering rates sometimes change on an hour-by-hour basis," she said.
Given the jam, Wells Fargo no longer allows its loan officers to lock in rates for less than 90 days so there's enough time to close the loans, said Bill Malkoun, branch manager at Prosperity Mortgage, a joint venture of Wells Fargo and Long & Foster.
"It's as if the entire nation woke up one morning and decided they all wanted to refinance at the same time," Malkoun said. "Sometimes I pick up one message, return that call and then find four more waiting."
Refinancing activity took off after Nov. 25, when the Federal Reserve announced it would buy mortgage-backed securities to help loosen consumer lending. Mortgage rates immediately plummeted well below 6%, breaking a psychological barrier. Refinance applications have soared each week since, though they tapered off around New Year's Day.
Bank of America and other lenders said activity had rebounded to preholiday levels as rates continued to decline. This week, the average for 30-year, fixed-rate mortgages dropped below 5% for the first time since Freddie Mac began keeping records in 1971.
With all the refinancing buzz, Ron Gross of North Bethesda, Md., expected to snag a great rate when he called his lender, CitiMortgage. Instead, he got a recording saying that because of heavy call volume, his call could not be answered. "I couldn't even leave a message."
Susan Cecala of Falls Church, Va., said she, too, could not break through the automated message systems or voice mails. She called two lenders and two mortgage brokers, who act as liaisons between lenders and borrowers.
"Bank of America even sent me something in the mail inviting me to refinance with them, and when I called, they referred me to apply on the Web," she said. "I never did hear from them. Isn't that strange?"
Finally, a friend referred her to a broker who helped her.
ElBoghdady writes for the Washington Post.
Last edited:
Fed Struggles to Damp Rise in Mortgage Rates
--Fed is tackling too many issues at the same time: boost money market liquidity, buying MBS/Agency, recapitalizing banks, and buying toxic asset; Some worked and might work in the future, but some might fail. It seemed making no sense to buy MBS to increase mortgage credit. It is a dangerous game. It will take probably more than 500 bil to maitain the mortgage credit for a while, not a shor time frame. I hope it is a calculated move.
By PRABHA NATARAJAN
President Obama has vowed to lower mortgage rates for Americans, but that may be easier said than done.
Since the start of this year, the Federal Reserve has spent some $70 billion buying bonds backed by home loans in an attempt to lower mortgage rates. After an initial success, however, rates are starting to drift higher again.
It is a reminder of the problems facing the U.S. housing market and highlights the limits of the Fed's ability to stabilize conditions. The central bank has pledged to buy $500 billion in mortgage bonds by June, with the promise that it would purchase more if necessary.
The 30-year fixed mortgage rate fell as low as 4.875% at the start of January from above 6% in November when the Fed first announced its purchasing plan. But the momentum has changed and the rate has been moving higher, hitting 5.34% Monday, according to Bankrate.com.
Other factors outside of the central bank's control have kept mortgage rates from falling further. Increased borrowing by the federal government to fund stimulus packages has helped drive underlying Treasury yields, and by extension mortgage rates, higher. Uncertainty about whether the Fed will continue its purchases after June -- as well as the future of Fannie Mae and Freddie Mac -- also has worked to keep mortgage rates from falling further.
Typically, the 30-year mortgage rate is based on the sum of the 10-year Treasury yield, the risk premium on mortgage bonds guaranteed by Fannie and Freddie, and bank fees and charges.
The Fed's intervention only targets lowering the risk premium on mortgage bonds over Treasurys. Average premiums have shrunk one percentage point to 1.8 percentage points since the Fed announced its program late last year.
However, Treasury yields have climbed over the past month as the government churned out more debt, negating some of the impact of the Fed's mortgage purchases.
The Fed has said it would consider buying longer-dated Treasurys, which would send government-bond yields lower again. The Fed said last week that it would only buy Treasurys if that move would be "particularly effective in improving conditions in private credit markets."
Reuters
Foreclosures in Stockton, Calif., discourage prospective sellers from putting their houses on the market.
Another complicating factor for the Fed is one of its own making. Lower rates have caused many homeowners to refinance existing mortgages. Rising refinancings, however, create new supply, and there is concern about whether there are enough private investors to buy these freshly minted mortgage bonds.
"Buying $500 billion worth of [mortgage bonds] seems like a lot, but it's not enough to absorb the potential supply coming into the market from refinancing activities, which are expected to climb even further with rates remaining at this level," said Sean Dobson, chief executive officer of Amherst Holdings, a boutique mortgage-securities trader.
The central bank, however, has said that it would go beyond the $500 billion amount if needed.
There still is no clear strategy to prop up the housing market. Some argue that lower rates alone aren't a fix, as home affordability still remains an issue.
Others suggest that the best option may be for the government to create an entity through which it could offer 30-year mortgages at preset rates of, say, 4% or 4.5% as an incentive to draw in potential homeowners.
However, the issue with such a program is the lack of investors.
"Not a lot of buyers are likely to want to buy a 3.5% mortgage-backed security, so the government may end up being a significant holder of these loans," said Nicholas Strand, a mortgage strategist with Barclays Capital. "And that number could run up to trillions of dollars
--Fed is tackling too many issues at the same time: boost money market liquidity, buying MBS/Agency, recapitalizing banks, and buying toxic asset; Some worked and might work in the future, but some might fail. It seemed making no sense to buy MBS to increase mortgage credit. It is a dangerous game. It will take probably more than 500 bil to maitain the mortgage credit for a while, not a shor time frame. I hope it is a calculated move.
By PRABHA NATARAJAN
President Obama has vowed to lower mortgage rates for Americans, but that may be easier said than done.
Since the start of this year, the Federal Reserve has spent some $70 billion buying bonds backed by home loans in an attempt to lower mortgage rates. After an initial success, however, rates are starting to drift higher again.
It is a reminder of the problems facing the U.S. housing market and highlights the limits of the Fed's ability to stabilize conditions. The central bank has pledged to buy $500 billion in mortgage bonds by June, with the promise that it would purchase more if necessary.
The 30-year fixed mortgage rate fell as low as 4.875% at the start of January from above 6% in November when the Fed first announced its purchasing plan. But the momentum has changed and the rate has been moving higher, hitting 5.34% Monday, according to Bankrate.com.
Other factors outside of the central bank's control have kept mortgage rates from falling further. Increased borrowing by the federal government to fund stimulus packages has helped drive underlying Treasury yields, and by extension mortgage rates, higher. Uncertainty about whether the Fed will continue its purchases after June -- as well as the future of Fannie Mae and Freddie Mac -- also has worked to keep mortgage rates from falling further.
Typically, the 30-year mortgage rate is based on the sum of the 10-year Treasury yield, the risk premium on mortgage bonds guaranteed by Fannie and Freddie, and bank fees and charges.
The Fed's intervention only targets lowering the risk premium on mortgage bonds over Treasurys. Average premiums have shrunk one percentage point to 1.8 percentage points since the Fed announced its program late last year.
However, Treasury yields have climbed over the past month as the government churned out more debt, negating some of the impact of the Fed's mortgage purchases.
The Fed has said it would consider buying longer-dated Treasurys, which would send government-bond yields lower again. The Fed said last week that it would only buy Treasurys if that move would be "particularly effective in improving conditions in private credit markets."
Reuters
Foreclosures in Stockton, Calif., discourage prospective sellers from putting their houses on the market.
Another complicating factor for the Fed is one of its own making. Lower rates have caused many homeowners to refinance existing mortgages. Rising refinancings, however, create new supply, and there is concern about whether there are enough private investors to buy these freshly minted mortgage bonds.
"Buying $500 billion worth of [mortgage bonds] seems like a lot, but it's not enough to absorb the potential supply coming into the market from refinancing activities, which are expected to climb even further with rates remaining at this level," said Sean Dobson, chief executive officer of Amherst Holdings, a boutique mortgage-securities trader.
The central bank, however, has said that it would go beyond the $500 billion amount if needed.
There still is no clear strategy to prop up the housing market. Some argue that lower rates alone aren't a fix, as home affordability still remains an issue.
Others suggest that the best option may be for the government to create an entity through which it could offer 30-year mortgages at preset rates of, say, 4% or 4.5% as an incentive to draw in potential homeowners.
However, the issue with such a program is the lack of investors.
"Not a lot of buyers are likely to want to buy a 3.5% mortgage-backed security, so the government may end up being a significant holder of these loans," said Nicholas Strand, a mortgage strategist with Barclays Capital. "And that number could run up to trillions of dollars
LOL, I take it! Thank you very much Zob Ahan jaan. So I take it you are seeing a rush of refinance for the conforming and seeing a very slow process rate from banks. How is the lending standard compared to the past, since you know how it was prior to the latest craze. Is it like it was in the late 90s or tighter? What are the banks most sensitive too? Is it the credit score, or income, or something else? Are you seeing much new loans for purchases? Are any being rejected based on appraisal? Have any of the banks pressured you on your fees?
On your comment, calculated move by Washington? You got be kidding me. On top of that we have a certified bozo in Bernanke in charge of the Fed. After all the hoopla he made that he is not going to be flooding the market with money in response to a weak economy, holding back for months thus turning a problem into a full blown crisis, he is doing exactly that except that this time he has to give away trillions instead of just a couple of hundred billions that it would have cost earlier. I wouldn't hire him for my local bank let alone the Fed. A true bozo that is in way over his head.
On your comment, calculated move by Washington? You got be kidding me. On top of that we have a certified bozo in Bernanke in charge of the Fed. After all the hoopla he made that he is not going to be flooding the market with money in response to a weak economy, holding back for months thus turning a problem into a full blown crisis, he is doing exactly that except that this time he has to give away trillions instead of just a couple of hundred billions that it would have cost earlier. I wouldn't hire him for my local bank let alone the Fed. A true bozo that is in way over his head.
- REVIEW & OUTLOOK
- FEBRUARY 6, 2009
The worst mortgage idea since Barney Frank's last one.
How's this for a bright idea to boost home prices and goose the economy: Have two government-chartered entities exploit Uncle Sam's low borrowing costs to subsidize mortgage rates. Lower borrowing costs will make housing more affordable and increase demand for unsold homes. If this sounds hauntingly familiar, that's because it is.
Think Fannie Mae and Freddie Mac, whose mortgage-rate subsidy helped get us into this mess.
Well, here we go again, though this time the Republicans are offering the free lunch. Under a proposal endorsed this week by Senate GOP leader Mitch McConnell, Fannie and Freddie would serve as the conduit for 30-year mortgages with fixed 4% interest rates. This is based on an idea that economists Glenn Hubbard and Christopher Mayer first floated on these pages, targeting a 4.5% fixed rate. Let's just say this proves we don't agree with everything we publish.
More
- Low-Interest Mortgages Are the Answer 12/17/08
– R. Glenn Hubbard and Christopher J. Mayer
Because 10-year Treasury yields are currently around 2.9%, the government could in theory borrow the money, lend it out at 4% and make these mortgages available at minimal cost. These mortgages would encourage buyers to buy and so stem the decline in home prices. If they were made available to those refinancing, they could also help people struggling to pay their mortgage bills or facing resets on adjustable-rate loans.
That's the theory.
The problems are price-fixing, taxpayer cost, and a misunderstanding of housing trends. True, the government would not set the prices of the houses themselves. But by fixing the price of home financing, the government would be nationalizing one more branch of the housing market. The feds tried this recently with student loans, and the result is that the private market largely collapsed. After this all-too-predictable result, Congress did what comes naturally: It blamed lenders who withdrew from the market for being "greedy." And it had the government -- the taxpayer -- become the main lender to students.
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If the government wanted to avoid this fate, it could instead let banks make the loans and subsidize them for the difference between the 4.5% rate and the market rate. But wait -- if the government has fixed the price, there is no market rate, so there's no way to know what a "fair" rate of subsidy is. This was one of the problems with Congress's 2007 student-loan reform. Lenders and lawmakers had different ideas about how to define fair compensation, so the lenders walked.
Proponents nonetheless claim this would help consumers by lowering their mortgage payments and stopping the house-price decline. In fact, the impact on home prices or housing demand is likely to be small. Some supporters claim a 4.5% mortgage rate could add 12% or more to house prices. But other estimates put the home-price boost at closer to 1%-3%, a tiny improvement in a dismal market. Home prices in many markets are still too high compared to long-term trends, and they are likely to keep falling until they get back to that norm.
Mr. Hubbard says 4.5% mortgages could boost homeownership back to levels last seen in 2004, at the height of the boom. That seems unlikely. Those who have had their credit destroyed by foreclosure are probably not the best candidates for jumping back into the housing pool. Most of the people who would take advantage of these loans either would have bought a home anyway, because they need one, or already own a home and want to (but don't need to) lower their rates.
But even if this did happen, it's not clear why it should. These days even Barney Frank agrees that homeownership rates were artificially high at the end of the boom. Getting back to those levels would only presage another bust. That bust would be scheduled for shortly after this supposedly temporary program ended, assuming it ever does. Right now, 30-year mortgage rates are hovering around 5.5%. These are already nearly as low as they've been in a generation. Even if they only went back up to current levels after the program ended, rates would seem high to homeshoppers merely because they are higher than they were. So any new demand generated now would have to be set against the depressed demand in the future.
More
- The GOP Has a Dumb Mortgage Idea 02/05/09 – Ed Glaeser
Any such program would also have to be huge -- and hugely expensive. Harvard's Ed Glaeser estimated on these pages Thursday that a $10 trillion program might cost the Treasury $135 billion or so. But that assumes that all those mortgages are paid back in full. And keep in mind the money would have to be borrowed -- in addition to the $3 trillion or so the Treasury will already have to borrow in the next two years. If interest rates and thus federal borrowing costs rise to the 1990s average for the 10-year note of 6.5%, look out.
We realize Republicans feel obliged to have their own "stimulus" plan, and that doing something for housing scores well in polls. We also remember when the subsidy to Fannie and Freddie was considered costless too. Tens of billions later, the tab is still growing. This one could be larger.
happenings in the australian market if anyone is interested to read....
First-home buyers swamping banks
LENDERS are struggling to keep pace with an unexpected increase in applications from first-home buyers, taking as long as a month to approve loans, which has led to some buyers missing settlement dates.
Strict new lending criteria are adding to delays, as is the inexperience of new home buyers having trouble navigating a maze of paperwork.
Banks are being forced to add staff to mortgage processing divisions, which they had previously run down.
In a recent note to mortgage brokers, seen by the Herald, St George Bank's head of intermediary distribution, Steve Heavey, said the bank had hired additional staff to cope.
"Our processing area continues to be under increased pressure as we clear our pipeline following our recent campaigns," he wrote. "We ask for your patience during this period and request that you manage your customers' expectations during this difficult time."
Mr Heavey also raised the issue of borrowers missing settlement dates if documents were signed incorrectly.
"The additional time required to reissue and re-check documents can inhibit the bank's ability to meet a customer's required settlement date, and in some instances result in settlement dates being missed."
First-home buyers have until June 30 to qualify for the increased first-home owners grant, worth up to $24,000 in NSW for a new home and $14,000 for an established one.
A spokesman for the Commonwealth Bank, Steve Batten, said the bank had also taken on extra staff in its mortgage processing division. .
He said about half of all applications received by the bank for the first-home buyers grant in NSW required "a rework" because of insufficient or incorrect information provided on the forms, adding to delays. The figure was 90 per cent in Queensland.
"There is a massive volume at the moment of people trying to get into the market," Mr Batten said. Staff were working at weekends to clear the backlog, and waiting times for approval had been reduced from 20 days to 10.
Citibank recently told brokers it would no longer be granting pre-approved loans, where a property has not been secured. RAMS has warned that loan approvals will take up to 28 days.
The principal broker at Citieast Finance, Peter Howe, said one lender had taken an entire month just to start looking at an application.
"The process of organising finance and buying a property can be quite daunting for some first-home buyers," he said.
"A good broker will do everything possible to have your finance approved and ready for settlement. This is not so easy at the moment; there are a couple of banks with products that are very attractive to first-home buyers that are struggling to process the volume of applications they have received in the last months.
"In the current market, processing time should be as important [a criteria for borrowers] as available interest rates."
An adviser at Ward Finance, Roger Ward, said the flight to the safety of the big banks had caused a logjam in their mortgage approval sections: "It's taking about three to four weeks to get loans priced and approved."
The principal broker at The Home Loan Office in Bankstown, Murat Bayari, said lenders had been caught out by the first-home buyers rush.
"When there was a downturn last year, the banks may have cut back on their lending staff. When the rush actually hit, they weren't prepared."
First-home buyers swamping banks
LENDERS are struggling to keep pace with an unexpected increase in applications from first-home buyers, taking as long as a month to approve loans, which has led to some buyers missing settlement dates.
Strict new lending criteria are adding to delays, as is the inexperience of new home buyers having trouble navigating a maze of paperwork.
Banks are being forced to add staff to mortgage processing divisions, which they had previously run down.
In a recent note to mortgage brokers, seen by the Herald, St George Bank's head of intermediary distribution, Steve Heavey, said the bank had hired additional staff to cope.
"Our processing area continues to be under increased pressure as we clear our pipeline following our recent campaigns," he wrote. "We ask for your patience during this period and request that you manage your customers' expectations during this difficult time."
Mr Heavey also raised the issue of borrowers missing settlement dates if documents were signed incorrectly.
"The additional time required to reissue and re-check documents can inhibit the bank's ability to meet a customer's required settlement date, and in some instances result in settlement dates being missed."
First-home buyers have until June 30 to qualify for the increased first-home owners grant, worth up to $24,000 in NSW for a new home and $14,000 for an established one.
A spokesman for the Commonwealth Bank, Steve Batten, said the bank had also taken on extra staff in its mortgage processing division. .
He said about half of all applications received by the bank for the first-home buyers grant in NSW required "a rework" because of insufficient or incorrect information provided on the forms, adding to delays. The figure was 90 per cent in Queensland.
"There is a massive volume at the moment of people trying to get into the market," Mr Batten said. Staff were working at weekends to clear the backlog, and waiting times for approval had been reduced from 20 days to 10.
Citibank recently told brokers it would no longer be granting pre-approved loans, where a property has not been secured. RAMS has warned that loan approvals will take up to 28 days.
The principal broker at Citieast Finance, Peter Howe, said one lender had taken an entire month just to start looking at an application.
"The process of organising finance and buying a property can be quite daunting for some first-home buyers," he said.
"A good broker will do everything possible to have your finance approved and ready for settlement. This is not so easy at the moment; there are a couple of banks with products that are very attractive to first-home buyers that are struggling to process the volume of applications they have received in the last months.
"In the current market, processing time should be as important [a criteria for borrowers] as available interest rates."
An adviser at Ward Finance, Roger Ward, said the flight to the safety of the big banks had caused a logjam in their mortgage approval sections: "It's taking about three to four weeks to get loans priced and approved."
The principal broker at The Home Loan Office in Bankstown, Murat Bayari, said lenders had been caught out by the first-home buyers rush.
"When there was a downturn last year, the banks may have cut back on their lending staff. When the rush actually hit, they weren't prepared."
more from australia....
First-home grants a misguided move
IS THE proper response to a collapsing market bubble an effort to reinflate it? The Rudd Government's boost to the first-home buyers grant scheme is producing some perverse results and may well end in tears for many borrowers and lenders alike. The scheme is looking less and less wise as the decision whether to continue it beyond this financial year approaches.
First-home buyers have become the most active sector of a generally flat property market since October when the grant was doubled to $14,000 for existing homes and tripled it to $21,000 for new properties. This has led to a disproportionate response to the cuts in interest rates over that period. People already owning or buying their homes have not been tempted much to take out new mortgages. But first-home buyers have rushed to the banks to borrow more than they would have otherwise, with first mortgages averaging about $281,000 last month as against about $230,000 a year earlier. Much of this reflects higher prices at the cheaper end of the home market. First-home buyers are thus using the grant to lever themselves into bigger debt.
With the tempo of interest rate cuts now slowing, and one of the big four banks this week signalling a rise in its fixed interest rates, this puts many borrowers in a highly vulnerable position if they fall victim to the job-shedding foreseen by a quarter of small and medium businesses in the next three months, or the redundancies continuing among many big firms. Once a large number are forced to sell their new flats, values will fall back for those home buyers still hanging in.
As the the Herald's economics writer, Jessica Irvine, wrote yesterday, the Government would be advised to return to the conclusions of Labor's housing affordability summit held before the 2007 election and concentrate on boosting savings among aspiring home buyers and encouraging greater supply of housing from builders and developers. Politicians - and parents - should lay off the adage that rent is always "dead" money. So, too, is interest, if the asset being acquired is going to fall in value.
The first-home grants have some effect as an economic stimulus: the bottom-up pressure in the market helps retain some "wealth effect" and confidence among existing home owners. But the Government would do much more for housing affordability, both to buy and to rent, and for economic activity if the funds were devoted solely to boosting new housing.
First-home grants a misguided move
IS THE proper response to a collapsing market bubble an effort to reinflate it? The Rudd Government's boost to the first-home buyers grant scheme is producing some perverse results and may well end in tears for many borrowers and lenders alike. The scheme is looking less and less wise as the decision whether to continue it beyond this financial year approaches.
First-home buyers have become the most active sector of a generally flat property market since October when the grant was doubled to $14,000 for existing homes and tripled it to $21,000 for new properties. This has led to a disproportionate response to the cuts in interest rates over that period. People already owning or buying their homes have not been tempted much to take out new mortgages. But first-home buyers have rushed to the banks to borrow more than they would have otherwise, with first mortgages averaging about $281,000 last month as against about $230,000 a year earlier. Much of this reflects higher prices at the cheaper end of the home market. First-home buyers are thus using the grant to lever themselves into bigger debt.
With the tempo of interest rate cuts now slowing, and one of the big four banks this week signalling a rise in its fixed interest rates, this puts many borrowers in a highly vulnerable position if they fall victim to the job-shedding foreseen by a quarter of small and medium businesses in the next three months, or the redundancies continuing among many big firms. Once a large number are forced to sell their new flats, values will fall back for those home buyers still hanging in.
As the the Herald's economics writer, Jessica Irvine, wrote yesterday, the Government would be advised to return to the conclusions of Labor's housing affordability summit held before the 2007 election and concentrate on boosting savings among aspiring home buyers and encouraging greater supply of housing from builders and developers. Politicians - and parents - should lay off the adage that rent is always "dead" money. So, too, is interest, if the asset being acquired is going to fall in value.
The first-home grants have some effect as an economic stimulus: the bottom-up pressure in the market helps retain some "wealth effect" and confidence among existing home owners. But the Government would do much more for housing affordability, both to buy and to rent, and for economic activity if the funds were devoted solely to boosting new housing.