Ministers should set up an institutional buy and rent-back scheme, it has been suggested, to help the national economy.
RBS economist Richard Barwell has called on the Government to set up a body which would buy the homes of people struggling with their mortgages, and which would allow them to stay on as rent-paying tenants.
Barwell said the proposal would target home owners who are holding back spending because they are in negative equity or do not have much equity in their homes, or have other debts.
They could sell their homes to an institutional buy-to-let investor and use the proceeds to pay down their mortgage.
He said: “In most cases, this process will release some equity tied up in the property.
“The hope is that those individuals will become debt-free and may then be more likely to spend. There might be a significant impact on consumption.”
The plan could be funded by either the issuance of government bonds or by a state guarantee and private-sector finance, he said.
He said the programme might also stabilise the housing sector, because the institutional scheme could choose when, and how many, properties to place back on the market.
Comments
Here Here ......This would solve many issues... for the banks.
Fantastic idea. This would solve many issues... for the banks.
Taxpayer being asked to take on more risk to avoid RBS (and others) facing the facts. RBS would love to convert a distressed borrower into a long term debt slave.
Plenty of distressed borrowers would be much better off in the long run with bankruptcy as they'll clean the slate and rid themselves of the manacles of debt, but this is a scenario RBS cannot countenance- forced to take appropriate writedowns on stupid lending on residential property. Much better to pretend to care and lock 'em in forever. Trebles all round!
It would be like the council house scheme that Margaret Thatcher did away with
Private buy and rent back schemes are banned given these companies often failed to advise consumers properly, among other failures.
However, the government does run a Mortgage Rescue Scheme which offers both a shared equity loan and a buy and rent back option deopending on your situation. Clearly there is not enough awareness of it if Mr Bartwell is unaware of it, but it does exist!
But wouldn't that be like the sale and rent back schemes that the FSA banned earlier this year??