David Cameron is mad to spend £400m on the housing market

Housing has been the downfall of the US and UK economies. Trying to stop prices reverting to the mean only makes things worse: it swaps slump for moral hazard and a rebalanced future for a new version of our ropey past. So why do we keep coming up with hairbrained schemes to 'fix' the market?

I'm doing a recording for Newsnight this afternoon on David Cameron's new housing initiative. Its centrepiece and the bit that is getting all the attention is a mortgage indemnity scheme. Right now the first-time buyer is a relatively endangered species thanks to the fact that the banks are demanding an average deposit of around 20% from them. That's something not many people can come up with. So, even if they have the income to make their monthly payments, they can't get a loan.

The coalition's big idea is to underwrite a portion of the loan, so shifting the loan-to-value ratio so that buyers need a smaller deposit. They put down their 5% on a new build house. The bank lends the remaining 95%, but the government and housebuilders backstopnine of those percentage points. The housebuilders take on the risk of 3.5% by putting the equivalent in cash in an indemnity account, and the government guarantees another 5.5%. The result? A bank can offer a 95% mortgage but only be on the hook for an 86% loan. Magic.

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.