U.K. Should Buy Homes to Stimulate Economic Growth

The U.K. government should set up a body to buy homes to help Britons reduce their debts and increase spending, according to Royal Bank of Scotland Group Plc (RBS) economist Richard Barwell.  Current policies are limited in their ability to stimulate the economy as Britain is being held back by a “balance-sheet recession,” Barwell said. The proposal would target homeowners who are holding back spending because their mortgages are worth more than the value of their property or who don’t have much equity in their homes, he said.  “If that fraction of the mortgage population is sufficiently large, then when coupled with those households struggling with the burden of unsecured debt, we could arrive a material fraction of the population that may be unwilling to increase spending in response to monetary stimulus,” he said.  The program would see authorities setting up an institutional buy-to-let investor to which individuals could sell their property, remain as rent-paying tenants and use the proceeds to pay down their mortgage, Barwell said.  Read more on the Bloomberg Businessweek website.