If the value of that house skyrocketed to £650K, that's the government's fault for creating the inflation in the first place. However, the area nearby may have improved to a level that makes this possible. Gentrification causes that and Milwaukee has areas where the homes sold for $20K in the 1970s, but the property tax grew to such an extent that they could no longer pay for that, even if they had no remaining loan. I have written many times about how Milwaukee is run and this is part of the result. I live in a small city (suburb) of Milwaukee and my property tax is about twice as much as I paid when I bought the house. It's nothing special, but the area is nice, if you can forget about the criminals coming in to raise hell. I have a friend in the adjoining county whose house is larger and on a lot that's close to an acre- he pays about 65% of my tax bill and his insurance is lower, too.
WRT the heavy subsidies for homeowners, the government like people to feel good about themselves and home ownership helps with that but during Jimmy Carter's term as President, Congress came up with a way for people to buy a house without the boring stuff like A) good credit rating and references, B) enough income, C) likely higher future earning and D) enough money to maintain the place. Fast forward to Clinton and the Glass-Steagall Act was repealed- it was enacted in 1933, to prohibit bankers from using depositors' money to pursue high-risk investments, but the
act was effectively undercut by looser restrictions. Those practices led to the Great Depression and by loosening restrictions/repealing this Act, it created an environment where bad loans could be bundled and sold as an investment opportunity. It was risky, but when people see dollar signs, they lose their minds but hey, mortgages are insured, right? Sure, they are. Why should the idiots selling these care about defaulted mortgages when someone else can be left to clean up the mess? Warnings came out in the early-2000s, with George W Bush being one of the people to sound the alarms. A program about Countrywide Mortgage was shown on the Public Broadcasting Network and in one section, a former employee told of starting his job and seeing a Porche 911 at the front row of the reserved parking spaces with 'FUNDUM' on the license plate. He asked what it meant and was told "If they can fog a spoon, FUNDUM" (give them the loan). The CEO of a major mortgage insurer went to Congress and testified that if it wasn't changed, the US would be seeing financial problems as never before and they basically ignored him, partially because of some members of Congress- Barney Frank, Chris Dodd and Franklin Raines were in positions that allowed them to control things in this area. FannieMae & FreddieMac are government run enterprises that are run as a business that operated at high risk and the CEO I mentioned started a group called 'Fannie Mae and Freddie Mac Must Die'. They didn't and the world suffered because of it. They were a good idea, but the plan was corrupted- it was supposed to combat monopolization of the mortgage industry.
https://www.history.com/topics/great-depression/glass-steagall-act
Did Fannie and Freddie cause the mortgage crisis? No, they responded to shifts in the mortgage market. Eliminating them would cause different problems.
www.thebalance.com
