No down redux

Back on Mar. 15, we posted an entry about the government’s new Flat 35 plan to stimulate property sales. The main new feature of the plan is that people who want to buy homes can borrow 100% of the money needed, meaning that they don’t have to make a down payment. A recent article in the Tokyo Shimbun talked about the inherent dangers of this plan, outlining what a typical family could expect to pay for the next 35 years if they buy a typical property usisng the plan. Though the interest rate is fixed, the writer of the article, one of Japan’s most noted housing experts, compared the situation it sets up to the situation caused by the spread of subprime loans in the U.S. Basically, he says that the purpose of the loan is to draw people into the housing market who don’t really make enough money to buy homes. Once they get into the market, they find they will have less money to pay for other things, like their children’s education. The government tried something similar in the 1990s with so-called “relaxed loans” and a lot people went bankrupt. He thinks Flat 35 will lead to even more.

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