THE OECD has in effect, accused the Bank of England and the Coalition government of blindly organising another banking disaster, under the cover of its ‘help to buy scheme’, which has encouraged people, many of whom are already deep in debt, to take up mortgage deals that require just a five per cent deposit.
There is now a state of alarm and panic about this housing bubble that they have consciously created and is now expanding rapidly. There are demands that it be burst, by a series of interest rate rises, the scrapping of the help to buy scheme, and the BofE using legal powers to halt small deposit mortgages.
At the least the OECD demands that buyers should be made to produce much bigger deposits, in an attempt to slow down the booming bubble that we are now being told is putting the ‘recovery’ at risk.
It adds that Osborne’s Help to Buy scheme must be cut back or scrapped, and that the Bank of England should use its new legal powers to force banks to cut back on lending. In fact recent statements from senior figures at the Bank of England have identified the housing market, and the coalition government’s prize ‘help to buy scheme’ as the biggest threat to Britain’s financial stability.
The OECD has stated that house prices are rising at 10% a year and that would-be house purchasers are now taking on unsustainable levels of debt. It wants to see the bubble burst by an immediate rise in interest rates as well as using the new law that gives the Bank a ‘Prudential Regulatory Authority’ to limit bank lending to would-be housebuyers
‘Monetary policy tightening should be accompanied by timely prudential measures to address the risks of excessive house price inflation,’ the report said. Additional use of macroprudential and other tools to help ensure a balanced recovery in the housing market and contain household leverage should be considered, including tighter access to the Help to Buy programme and the introduction of higher capital requirements or low maximum loan-to-value ratios for mortgages.’
The OECD is telling the coalition to raise rates, cut back bank-lending and insist on much bigger deposits, creating the conditions where millions of mortgage payers who are already deep in debt will go broke, touching off the UK’s own sub-prime mortgage crisis that will further enrage a ruined middle class, but hopefully save some of the banks.
What the OECD is proposing is that the middle class should be ruined and turned into paupers in the hope that it is still not too late to avoid yet another banking disaster, and yet another multi-trillion bank rescue operation.
The OECD’s remarks come after regulators, in fact, started moving to make it harder to get a mortgage. The Financial Conduct Authority this month told lenders to ask tougher questions about the lifestyle of mortgage applicants.
Bearing in mind the super-austerity measures that both the middle class and the working class have had to endure after the 2010 trillion pound bank rescue, another such critical situation would create impossible conditions for the ruling class to carry on ruling.
The storm clouds are gathering. Spencer Dale, the Bank’s new head of financial stability, last week identified the housing market as the biggest threat to financial recovery and said the country should be ‘nervous about what is going on in the housing market’.
Jon Cunliffe, a deputy governor at the Bank, has also said that it would be ‘dangerous’ to ignore the rapid rise in house prices.
What comes out of this renewed banking crisis is the inability of the ruling classes to escape from the law of value and its contradictions. They are unable to find a way out of the crisis and are doomed to attempt to repeat its catastrophic climax on a higher scale! If the 2010 crash was a tragedy the present developing crisis is a farce.
The only way out of this crisis, for the working class and the middle class, is the organisation of a socialist revolution to bring in a workers government and socialism, that is a planned socialist economy based on satisfying people’s needs, putting an end to capitalism and its crisis and its law of the jungle mentality for all time.