Taxpayer 'paying over the odds' for home loan bundles

A failing government strategy to buy up home loan debt bundles may be costing the Australian taxpayer $120 million, the Sydney Morning Herald reports.

The paper reports that the government’s $8 billion stimulus for the home loan market may be adding to the tax burden by forcing the government to back mortgage debt that no bank or investor wants to buy into.

Kevin Rudd’s government has agreed to take on these home loan debt bundles in a bid to calm fears about the stability of the housing and encourage new investors into the market.

However, chief economist at HSBC John Edwards told the paper: "The benefit has been much more marginal than first hoped."

One expert has estimated that if the government continues to take on home loan debt at prices no-one else will pay, the overspend cost to taxpayers could hit $120 million.

The government has been in the battle against the downturn again this week, with Kevin Rudd announcing that home loan customers struggling with payments will be given free legal support to try to make their lender relax repayment terms.

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