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Now the UK government wants banks to bail out borrowers

Not content with lending billions to the banks [1] and bailing out Northern Rock [2], the UK government has set its sights on homeowners who are struggling to pay their mortgages [3].

According to the BBC:

Homeowners will have enough support to ensure that their homes are not repossessed, the government says. The comments came after key mortgage industry figures met Chancellor Alistair Darling and Housing Minister Caroline Flint at 11 Downing Street. But ministers did not outline how they would stop people losing their homes.

There are two ways to read this news: cynically, and angrily.

Cynically: The Government knows the housing market will slow down, and will want to claim it did its bit

Believe it or not, empty PR spin would be the positive interpretation of these noises coming from the Chancellor Alistair Darling and PM Gordon Brown. It would imply that the Government accepts house prices are falling, realises that in two years’ time they’ll be getting the blame, and so are bleating a little now about helping homeowners [4] when nobody is listening so that they can point back to their ‘efforts’ in years to come.

Angrily: Having presided over the biggest boom in UK housing market history, the Government wants all the credit and none of the pain

With Northern Rock on taxpayers’ balance sheets and the majority of voters also homeowners, it’s more than possible that Brown and Darling really do hope to bully the banks and building societies into not chasing up repossessions, just as they’ve recently been urging lenders to support more home buyers [5], even as house prices have seemingly passed their crazy all-time highs and are finally coming down [6].

Yes, that’s right. They’re trying to tempt first-time buyers [7] to take out mortgages of 5-10-15 times their annual income. (The historical average is between 2-4 times annual income).

Let’s be clear about the facts here:

Honestly, what are young 20-something professionals supposed to think? If Brown and Darling want mortgage holders to get a break, will they be pushing landlords to cut rents for tenants, too?

It’s becoming increasingly difficult to keep politics off Monevator, which is perhaps inevitabe given that a Chancellor who claimed to have abolished the centuries old business cycle is now running the country.

Housing is too expensive. It happened on Mr Brown’s watch. I’m not saying we needed credit controls or mortgage rationing hitherto, but that was because I accepted that crazy fast price appreciation was the price of a free market.

The other side of the equation is that if people have finally realised we’re all paying too much for housing in the UK, then prices must be allowed to fall [10]. Homeowners should take their own measures to reduce the impact of the credit crunch [11], and we must all start taking responsibility [12] for our finances again.