If the presidential race doesn’t work out, Newt Gingrich may find a new consulting gig over in London. Prime Minister David Cameron wants to create a mini-Fannie-Freddie there, the FT tells us:
People buying newly built houses will need a deposit of as little as 5 per cent under measures designed by the government to help “unstick” the housing market.
David Cameron … announced the housing strategy on Monday and vowed to make the “dream of home ownership” a reality for more people.
The centrepiece is a mortgage [guarantee] scheme aimed at helping 100,000 prospective buyers excluded from the market because of banks’ refusal to lend at high loan-to-value ratios.
This is a terrible idea. The banks are right to refuse to lend recklessly, and subsidizing debt will only create more debt. Increasing the amount of money that people can borrow, thanks to a government guarantee, will push house prices up further.
Plus, saving up for a hefty down payment is good discipline, demonstrating that someone is financially responsible and that he has the proceeds of his own sweat and toil on the line.
On the bright side, maybe the next time President Obama visits the Queen, Michelle could give her our Fannie and Freddie, as one of those ceremonial gifts they exchange.
— Nicole Gelinas is a contributing editor to the Manhattan Institute’s City Journal.