Saturday, September 28, 2013

Quick – put more accelerant on the fire.

The Help to Buy mortgage guarantee scheme will be brought forward from January 2014 to next week.

Following on from Alan comment on a previous article today revealing that Land Registry figures showed only a 0.1% rise during August it looks suspiciously like the government are now in panic mode. 'The Help to Buy mortgage guarantee scheme will be brought forward from January 2014 to next week.'

Posted by enuii @ 11:47 PM (6521 views)
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71 thoughts on “Quick – put more accelerant on the fire.

  • Because the side effect, being the reflation of the UK economy, is unlikely to gain traction if Labour have promised a mass house building programme. Announcing a mass house building programme is pretty good forward guidance to limit house prices….
    Which aren’t in a bubble.

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  • Oh bl**dy hell, I thought you were joking, but you’re not.

    Ah well, the sooner the bubble, the sooner the pop, I suppose.

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  • last throw of the dice surely

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  • What a desperate Muppet!

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  • I’ve cross posted this on my blog.

    They must be really, really desperate.

    I think that they started throwing accelerant much too early, they should have left it until about 12 months before the election.

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  • It was obvious that people wanting to buy now would wait until January to get the free/cheap loan. That would have created a lull in house purchases.

    Bringing it forward to an immediate start was the only way to avoid that.

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  • Mental. Did not expect that.

    One month’s stats mean nothing and LR is 2 months behind.

    Personally, I think the recent boom was ppl with 10% deposits rushing to beat the 5% rush. Some of the effect of the subsidy was already priced in therefore, so best to move things forward. Similar to the fed and tapering (altho they called it off in the end, of course).

    tbh, I expected them to scrap it.

    I also still hold out hope it will be a non-event like so many of the other schemes and only a fraction of guarantees will actually be awarded.

    The desperation of this tells me that they’re pinning all their hopes on it. I guess the best I can hope for is for cash to hold its value until it finally becomes king.

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  • Bearlyconscious says:

    Aaaaaarrrrrrggggggghhhhh.
    Why don’t they leave the market alone to sort itself out?
    I feel so cheated: I’ve worked hard, I’ve saved harder, I’ve been patient, I assumed the market would be allowed to do its work, I expected a proper correction and now I’m still in a position where zombies with little thought or understanding have sat on their backsides a reaped the benifit of government profligacy.

    I’m seriously considering leaving the country….
    …not before I buy a property though :-0

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  • Just watched Dave on Andy Marr………summery of position…

    Banks won’t lend at the same LTV as they once did. Therefore the (un)affordability of housing is a problem of the mortgage market, not the housing market.
    People can afford the potential mortgage payments, but not save the deposit, therefore it is right that the taxpayer should intervene to prevent home ownership becoming the preserve of only those with rich parents.
    BOE to intervene if it spots a bubble developing.
    Whats not to like?

    Can anybody spot any logical errors or potential problems? Not Dave…..leader of the Nation!!

    Incredible. Absolutely Incredible.

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  • Is is possible for REAL UK house prices to decouple from that of it’s European neighbors? Would you pay £250k in the UK for a 3 bed semi where you can get on in a reasonable area of France, Ireland, Germany etc for £90k.

    I like to think that with globalization, banks, wages and interest rates are synced and now so are house prices.

    Time will tell, so glad I left the UK.

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  • Cameron often justifies what he is doing by saying that it is the ‘right thing to do’.

    Whilst doing the right thing is admirable, no interviewer ever seems to question whether it is actually ‘the right thing to do’.

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  • If the government had left well alone I would have my own place by now. Instead they have just priced me out as prices have gone up here by 20k.

    Hope liberals walk out and they crash the government

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  • Tick Tock: “People can afford the potential mortgage payments, but not save the deposit”

    I think that is the key bit of illogical nonsense underpinning this.

    By definition, if somebody can’t afford to scrap together a deposit, they can’t afford to repay the mortgage either, unless they sign up for forty years or something.

    And as Reticent suggests, there is good reason to assume that while Help To Sell will bring forward purchases/sales, there will be a corresponding lack of purchasers thereafter, so the whole thing reverses out quite nicely and we end up back where we started.

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  • Mark, I think you underestimate how hard it is for some people to save while paying high rents, equivalent to or even greater than a mortgage in many cases. H2B is – to some extent – the state providing what BOMAD has been doing for years. There are loads of couples out there who took money from parents for a deposit and are now paying down mortgages quite happily.

    I’m with the consensus here on HTB’s overall economic impact – it’s nothing short of lunacy and there are plenty reasons why – but the argument that if a couple can’t save quickly enough for what, post crunch, have been historically high FTB deposits, then they can’t pay a mortgage just doesn’t hold water.

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  • Its hilarious, he tries to justify this by saying that otherwise only rich people will be able to buy. Are people really seeing this for what it is? One big serf creation scheme!

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  • I was thinking more of the repayment ‘affordability’ being measured against current 300year (?) historical lows in interest rates.

    I would have thought that there was a good reason why a Bank wouldn’t want to lend against an overpriced asset, to people who can repay the debt only while interest rates stay at freakishly low levels.

    Dave knows better though apparently. I just wish we knew what he does.

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  • Is is possible for REAL UK house prices to decouple from that of it’s European neighbors?

    Khards,

    On Fantasy Island anything is possible. The is no longer any ‘solid ground’ against which value can be measured. Whatever is desired can be, and shall be, with neither payment nor consequence required. Therefore, why not?

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  • Monty: “There are loads of couples out there who took money from parents for a deposit and are now paying down mortgages quite happily”

    I’m sure there are, that all depends on whether BOMAD made a gift or whether you count that as a loan.

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  • This is exactly what led to the US house crash, incentivising risky borrowing. Just horrific. Just when the market was about to make life more affordable, they blow the little family silver on tat.

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  • I wonder what Vince thinks….. by the sound of it the tories are decoupling early from the libs with the announcement of the red lines.

    Its obvious they will lurch further to the right to embrace the disillusioned colonels of the shires that have gone to UKIP…… and if the 5% deposit runs out of steam how about 2% or 1% or how about providing taxpayer (thats us) guarantees for the 125% mortgage? At this stage nothing would surprise me.

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  • Techie, if the Tories want to win back people who vote UKIP, then appealing to NIMBYism and Home-Owner-Ism is always good as the main course (you can get votes from all parties doing that).

    But for dessert, don’t you think the Tories ought to try and live up to their pre-election promises and serve a large helping of “reducing immigration”? Because that is exactly what they are not doing, the numbers for gross or net immigrants are barely changed from Labour’s open-door period from 2000 to 2010.

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  • If it’s difficult to save for a mortgage while paying high rents why doesn’t the government bring in rent controls? Oh, I forgot, the government doesn’t like to interfere in free markets.

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  • Marr soft pedals.

    Steph used to do that when she was with the BBC. Now she’s top girl in JPM.

    Moral of the story – it pays to suck up to politicians and bankers. These greasy people will smile all the way to the crash – then express surprise. It’s only public money that pays their wages, after all!

    Just watch!

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  • From an objective economic standpoint, it is bizarre that the tories of all people who claim to uphold the capitalist free market economy (which if you ask me is a busted flush anyway) has intervened to basically give socialist support to an ailing asset market.

    Imagine if a country’s government intervened to prop up the market for cars or wheat or modern art. It would be thought of as nepotistic at best, corrupt at worst.

    It does seem remarkably desperate.

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  • True Paul, but then the Government (albeit the previous one) has form for doing exactly that. After all, the scrappage scheme was a perfect example of Government intervening to prop up the market for cars.

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  • I see the Independent is not buying it, so to speak.

    There is a long list of dissenters to this policy.

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  • Britain has the second highest level of household debt in the world. But it also has one of the highest levels of household assets: Peoples houses. If house price rise across the country then suddenly banks who have high mortgage books look rosy and solvent. If house prices drop significantly and the real cost of assets was adjusted in the balance sheet, then the major banks would be insolvent, even with all the extra cash that has been pumped into them. Could this be the real reason why the UK property market is being pumped up at any costs. At some stage in the future, quantitative easing will slow down or stop around the world and interest rates will go up. When this happens many asset classes could drop including housing. So I am wondering whether this is just a simple election manoeuvre or whether it part of a wider PR stunt to the rest of the world that the UK and our banking system is robust. Given when prices drop it is a slow burn, maybe they would prefer that the banks balance sheets on paper look much better than they are if another financial crisis hits the world. I note that the America fiscal cliff is upon us once, so all is not rosy around the world. The can at some stage will hit a brick wall.

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  • Paul …. absolutely laissez faire until it doesnt suit their voters. Of course you let market forces win when its the coal miners because to keep coal mines open is uneconomic, but to support the housing market, well that obviously makes perfect sense to ensure that people getting “on the ladder” have to sign their lives away.

    Of course when IRs go up and these Johnny come lateleys are left holding the bag then the increase in IRs will be the worldwide markets fault, And i always thought it was Labour who would give taxpayers money away. Oh yes take it from them benefit cheats and people with an extra bedroom and give it to property speculators.

    This just smacks so much of the buy now while stocks last MIRAS debacle of the 80s which marked the final top….. hmmm.

    MW re immigration, well obviuously yes they should. But Im not sure how. I mean they are literally powerless to resist any EU influx, as for the rest well we will have to see.

    On the other hand you have Milli Vanilly scoring an own goal with Energy. Fair enough if you want them to have a formula of cost+ x%, but how on earth can you tell them they have to freeze the prices? Surely that just encourages them to put them up for when the freeze is going to take affect. Do any of them have any sense?

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  • BB: ” If house prices drop significantly and the real cost of assets was adjusted in the balance sheet, then the major banks would be insolvent, even with all the extra cash that has been pumped into them.”

    I’m afraid on closer inspection this is a myth put about by the banks and/or the landowners.

    I’ve done the numbers, if house prices were to fall by x%, and all borrowers in nequity were to lose their jobs and default and banks took the entire loss on the chin, the loss to the banks is x% times x%.

    So a 10% fall plus chaos = 10% x 10% = 1% loss.

    Now, residential mortgage assets make up about three-quarters of UK banks real assets, so 1% x 75% = 0.75%.

    Banks capital buffers – if you include long term bonds – are about 20% or 30%, so that 0.75% is nothing that debt-for-equity swaps can’t sort out.

    Even in a total disaster situation where house prices fall by half, the total losses (50% x 50% x 75%) might just about wipe out shareholders and bondholders, but depositors would not lose a penny and the cash machines and direct debits would still work.

    Techie, but did Milli Vanilli score an own-goal? According to the article linked, that idea has been received quite positively hence why the Tories are pushing the even ten times more stupid idea about ramping up Help To Sell.

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  • Techie
    I do hope that your last question was rhetorical.

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  • Iguana – well i was looking to see if anyone would take issue ;).

    MW that’s as maybe but the electorate are as myopic as MV. But your right is it a competition to see who can F*ck up the economy most ? Involve UKIP and i see it as some kind of mexican stand off with innocent bystanders caught in the eventual crossfire – even though they supplied the bullets!!!

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  • sorry “you’re right” – its a bit rich me having a go at peeps being dumb when i cant speel [sic] properly!

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  • Milli Vanilli =Ed Milliband

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  • Thanks techieman.

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  • I wonder if we’ll get to 3000 views before 24 hours is up.

    This post reminds me of the olden days.

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  • “This post reminds me of the olden days.”

    I wish. In the olden days, there seemed to be a chance the property would be allowed to correct. Instead we’ve had ZIRP, QE and now HTB.

    I have a question: does anybody here believe that the next government will have the cojones to take the punch bowl away i.e. stop Help to Buy? I fear that government involvement will become a permanent feature of the mortgage market.

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  • I agree the Help to buy scheme is an absolutely terrible scheme and should be stopped even though it seems a little late now.

    However, if more people can now buy rather than letting a property does this mean that there will be more buy to let property landlords struggling to find tenants? How long will it be before the buy to let landlords put their properties on the market because they cannot afford to have them stood empty. This could increase the supply of properties on the market, and therefore stabilize the prices.
    This may be just wishful thinking but I would be interested to hear the views of other people on this site please?

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  • I don’t think we should be looking to this or the next government for a solution. Governments tend to only look after their own interests.

    These HPI schemes will juts blow a bigger bubble. The 2008 bubble never really popped in london. Real interest rates will normalise at some point, and then we will see if the economy we be able to support the house price structure. There are still powerful market forces at work, and i believe at some point these will bring about a correction. It could be years of flat housing prices with a pick up in general inflation.

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  • QG,
    Will the government have the guts to drop this silly scheme? Yes, they will simply lie to the electorate before the election and break the promise after. Angela was elected on the basis of “no more taxes”, and she’s already looking at higher taxation. Cameron has already broken election pledges, not to mention the LibDems – eg:Uni fees.

    Back on topic…Most couples under 28 don’t know why B&B and Northern Rock fell over, I suspect. Almost all of them will tell you they don’t care either. They are part of the problem, regrettably.

    I Reckon:

    a) Couples will put up 5% for a £600k mortgage.
    b) Market crashes (guaranteed).
    c) Couples now have 30k equity and £570k debt.
    d) Banks make a £billions.

    Can’t say I’m surprised by the splitting RBS (ie: Corsair). Now there are more banks to fund lending (and go bust again).

    For the moral of this fairy story, look no further than the 3 little pigs. The pig with the house of paper fell down when the wind came…..the house made of gold didn’t 🙂

    (apologies to non physical gold collectors on the site).

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  • Obviously the main reasons the government has introduced the Help To Buy scheme are to gerrymander votes at the next election and also make the banks appear more solvent, however I think there is another which I don’t think has been widely discussed. This additional reason is to make more people feel they have a stake in Britain and hence dissuade them from emigrating. If all the young people who can’t afford to buy a house, have student loans to service and not much chance of a cushy job with a pension decide to emigrate, then the country will be even more stuffed than it is already. Of course, if they are persuaded to buy at the current Monopoly money prices and then end up in negative equity when prices correct, they may still jump ship but that would be outside the timeframe which politicians are normally concerned with, I.e. between now and the next election.

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  • Bear Necessities says:

    Well the good news (if there is any) is that EVERY SINGLE top ranked comment on the BBC article about this (20 comments per page) is agreeing with the HPC view on this mental policy. The comments section is VERY VERY bearish. It’s quite refreshing

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  • OMG, I was so afraid that houses were going to get less expensive.

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  • You’ve all got this wrong. The government believe that house prices are bound to go up regardless of this scheme (recovering economy/lower unemployment, burgeoning population, hedge fund buying, btl/proxy pension buying, overseas buying).

    They are trying to help first time/private buyers to compete with corporate/hedge fund/btl buyers.

    Hoping for a housing bubble or economic meltdown is unrealistic in this cycle. Take what help you can get and organise your lives accordingly. Going against the HPC beehive is a proven safe bet.

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  • I recently stayed with a family who purchased their house on this scheme. They said they couldn’t have afforded it before because they spent all their cash on holidays, yet I have a deposit and felt stupid about not spending all my cash on holidays.

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  • One way around this, is, go for the 5% deposit on a home that can be extended, then invest the cash you would have put in a deposit on renovation and or extension of the property. For example, if you extend a two bed house into a four bed house, maybe the negative equity issue becomes a non-issue. For me, this is the only work around.

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  • QG: “does anybody here believe that the next government will have the cojones to take the punch bowl away i.e. stop Help to Buy? “

    I certainly don’t, Labour are just as Home-Owner-Ist as the Tories.

    And another general rule is that each UK government is worse than the one before it (John Major’s lot excepted). So whether the next govt is blue, blue-yellow, red or red-yellow, it will be even stupider and more wasteful than this one.

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  • Flash…. what’s the weather like in Manchester ? :). Ok here’s my point of view. EITHER you support both sides of the housing market or you let market forces determine both.

    So if you are trying to help private buyers compete make it less attractive to the corporate/hedge fund/btl buyers. How would you do that? By ensuring that anyone that rents out provides fair rents and that the dwellings are of a reasonable standard for those rents.

    I cant see how encouraging higher prices, through this policy discourages the corporate/hedge fund/btl buyers. You may say that restricting rental prices is a bad idea. But that is exactly whats done in the countries where the rented sector forms part of a more vibrant and affordable housing market, and where renters are not looked down and frowned upon – just look to continental Europe.

    In particular take a look at the model in la belle Swiss. Hardly a bastion of the loony left! In actual fact if anything encourage home ownership by making renting more affordable IF money saved on rent is put towards a deposit, to my Jim Kerr IF HMG wants to interfere in the market, allow people to save a % of the rent toward a deposit, whilst only allowing the LL to obtain a percentage of the same rent if they pass a yearly inspection. HMG should then restrict rent rises and, at the same time, the income lost by the LL could be offset against tax – thereby reducing its true cost. The rental saving would form part of a ring-fenced cash ISA,

    Encourage land banks to be used for building not hording. And yes build more.

    In simple terms prices of both rents and house prices are too high, especially now you have kids coming out of university impeded by large debts. How will encouraging either to go higher help?

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  • @libertas – been there, done that. You will find that in almost all cases, if a house has ‘potential’ to be improved extended etc. then the market would have priced this in accordingly – couopled with the ceeling price for a given area then 99% of the time you are on a loser extending and renovating.
    There are exceptions and they are usually found in auction.

    @flashman – talking your usual rubbish again. “This part of the cycle”. I think that your usual cycle theory may have gotten a little distorted with ZIRP and QE keeping the inefficient businesses (bankes) alive and globalization off shoring much of the low end work.

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  • Well, on Canada’s Dragon Den, advice offered to young people /first time buyers, about not listening to how much a bank will lend you for a mortgage, as points out that too much money servicing a mortgage doesn’t allow a buffer for life expenses and especially saving for a future pension, as people are not saving enough for this:

    http://www.theglobeandmail.com/globe-investor/investment-ideas/lets-talk-investing/20130905theglobeandmailltidavidchiltonpart01mp4/article14422961/

    So, Davie Boy thinks that borrowing more and increasing debt by increasing property prices, is going to help the UK in the future? Everything and more down the abyss for some walls and a roof – nothing going to productive assets in society and no pension or savings to live off later. I have friends in Germany, and they shake their heads at UK policy on housing – I guess they are busy making things that work and people around the world wish to buy. Here, it’s just selling out to foreign buyers for the easy money, but fixing nothing structurally. Time to emigrate unless you are part of ‘the boy’s club’ or have parents who can give you the 40m headstart in the 100m race. ‘We’re all in this together’ … good luck, I’m out of this country!

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  • Techie, rent caps don’t seem to work properly in this country (they work fine elsewhere, but not here, I don’t know why).

    So another one of my bright ideas (as an alternative or supplement to LVT) is instead of capping the rent for an individual home, we simply cap the amount of money which a tenant can spend on rent or an purchaser can pay in mortgage interest at say ten per cent of gross income (which would cut rents by half).

    So we still end up with the same “free market” allocation of housing – the highest earners end up in the nicest houses etc, but at a much lower cost.

    It’s like a buyer’s cartel, once people got used to the idea (they can teach it Social Science class at school) it would enforce itself, tenants would have to realise that if they over bid they are wasting their own money.

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  • techie, I don’t support the idea, I’m a free market man. I’m just reporting on the realities. The economy is recovering nicely and house prices are likely to go on rising regardless of this scheme. If I didn’t have a house, I’d bite the governments hand off. In fact, I’d be in a panic about all the hedge fund and corporate type buying because they’d be trying to make me a permanent renter.

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  • techie, I don’t support the idea, I’m a free market man. I’m just reporting on the realities. The economy is recovering nicely and house prices are likely to go on rising regardless of this scheme. If I didn’t have a house, I’d bite the governments hand off. In fact, I’d be in a panic about all the hedge fund and corporate type buying because they’d be trying to make me a permanent renter.

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  • techie, I don’t support the idea, I’m a free market man. I’m just reporting on the realities. The economy is recovering nicely and house prices are likely to go on rising regardless of this scheme. If I didn’t have a house, I’d bite the governments hand off. In fact, I’d be in a panic about all the hedge fund and corporate type buying because they’d be trying to make me a permanent renter.

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  • techie, I don’t support the idea, I’m a free market man. I’m just reporting on the realities. The economy is recovering nicely and house prices are likely to go on rising regardless of this scheme. If I didn’t have a house, I’d bite the governments hand off. In fact, I’d be in a panic about all the hedge fund and corporate type buying because they’d be trying to make me a permanent renter.

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  • Sorry about that. My phone didn’t look like it was responding

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  • Take it everyone on here is going to be jumping on the scheme in England. It would be daft not to.

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  • Khards: “You will find that in almost all cases, if a house has ‘potential’ to be improved extended etc. then the market would have priced this in accordingly”

    Exactly. If a house has planning permission for a massive extension, then Rightmove will flag this up as a selling point and stick the windfall gain onto the price, i.e. if the extension adds £100k value but would cost £50k to build, then the price is increased by £50k.

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  • Bellwether, I suspect it’s the unemployed hpc’ers who are most against this scheme because it only helps people with a job. The stuff above about not being able to make money extending a house speaks volumes. There is actually a fortune in it IF you’re good at it. I’ve been doing it off and on for years. The concept of being good at something is not recognised here where everyone thinks that it’s an outrage if mediocrity is not handsomely rewarded and anyone who does well is a cheat

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  • @57 bellwether

    I’m staying out of it although I know what you mean. It just seems like yet another round in an increasingly rigged game and I don’t like the idea of being bullied into buying. In any case, I cannot afford to buy anything I would want to live in, even though I rent a perfectly good flat privately and still save a third of my net income.

    As I have said before, I do not see how the FTBs of 2018 will be able to afford this mess when they still have 30k+ student debt. There will have to be a run on the pound and runaway inflation for any of them to be able to afford anything. Whilst that will destroy my savings, it will probably also mean an exodus of foreign money from London.

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  • @Flashman

    “They are trying to help first time/private buyers to compete with corporate/hedge fund/btl buyers.”

    They are trying to get votes. It’s one thing to argue that we should use the cheap debt to buy a house but to imagine that politicians would do anything that would risk votes for the greater good in domestic politics is stretching credulity.

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  • Flash we all have problems with the phone now and again, so no issues there. Im really not sure about the unemployed having a go most. I think the policy is really unhelpful to society in general. Its really discriminatory generationally in my view. As many have said here – including yourself – let the market do what it should do.

    Central planning / nanny state / government intervention always seems to be frowned upon by the tories… except when “housing ladders” are involved. As Paul has said (and i rarely agree with him) its unique that the tories apply a different set of criteria for housing . Which isnt really housing – its house prices. Playing to the Gallery. Fair enough but please dont treat the electorate like a load of tw4ts, im disgusted by the hypocracy but then again i suppose we only get what we deserve?

    I cant agree that they are doing it out of the goodness of their hearts to help people. They are doing it for political gains pure and simple.

    I never said it on here but genuinely did think there was a slim possibility there would be a last hurrah / final top. This looks to be a monumental suck in to me, of which i want no part. The time to get in was when you said, buying into strength works in markets until it doesnt. Aw well looks like my invite to dinner parties in London town will now be permenatly revoked :). I really feel sorry for the folks that are forced to pay through the nose for something that should be a basic human right. We should all be able to live in affordable, decent housing, without having to work all the hours just to service a mortgage or rent. THat makes no sense to me and cant help society.

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  • Flash,

    Don’t quite agree with you as to the main purpose of the scheme – unless it’s a crude attempt to undo damage caused by the state sponsored bubble in house prices in the decade up to 2007. If the government wants to help prudent hard working families buy then they should allow interest rates to rise, insolvencies to happen, land banks to be sold, and property and land prices to correct.

    If you use ZIRP and QE etc to shake institutions out of savings and into anything with a yield then BTL quickly becomes a target. Layers of central planning will inevitably have all sorts of other consequences.

    The current scheme will surely create further bubbles in property as more money is made available to chase finite asset. I don’t see that as for the good, although equally I think it’s crazy to be too squeamish to look capitalise on the trend.

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  • quiet guy, techie, bellwether. I don’t doubt that politicians keep a permanent eye on elections. I also don’t doubt that they are not above short term policies that will have consequences down the line. As I said above, I disagree with the policy. The reason I disagree is broadly because I believe in letting markets do their thing but specifically because I can’t stand policies that do not remotely address the core problem. We all know what I believe the core problem to be, so I won’t bang on about it.

    However, I do not believe the prevailing stereotype (on this site) of politicians being pantomime baddies who have never had an altruistic thought in their lives. It is clear to me that they often have good intentions. I think it is too readily accepted on this site that house prices would immediately crash if it were not for government intervention. I think this is why I had so much trouble persuading hpc’ers that supply and demand/population growth was a major factor (a bit captain obvious). They didn’t want to believe that anything real was holding up house prices.

    My comments were based on pragmatism. House prices are rising worldwide (they can’t all be down to UK help to buy) so there are clearly larger forces at work. Almost every briefing sheet (these are not written by estate agents and housebuilders) I see gives the opinion that house prices will continue to rise in the UK. The government reads these reports and takes them on board. They then see that there is a tendency for young buyers to be out competed and turned into long term renters. This scheme (in part) is clearly a response to that.

    I was surprised that no one (on a site like this!) had mentioned that the government was attempting to subsidise new home buyers. Aren’t hpc’ers always moaning about subsidies going to other people instead of them? I respect any opinion that states that house prices might fall thus ruining the new buyers ‘helped’ by this scheme. However I think there is strong evidence to suggest that house prices will continue to rise regardless of this scheme. This is the majority opinion of the public, economists and entities that actually buy houses. Surely, therefore, at least one person on a site like this should have mentioned that they were at least considering taking the governments subsidy to help them buy a house? That is why I am suspicious of so many people on this site. Do they actually have any interest in the housing market or buying a house or do they just want to talk half-witted nonsense about great depressions and currency collapse?

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  • To be fair to the depression and fiat time wasters, I’m also suspicious of the lefty time wasters. Large numbers of them (or two blokes with ten names) appear to troll through the threads searching for someone to argue with about Iraq and the Giddeon bible. Do these people have any interest in the housing market?

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  • @64 flashman – This is not a subsidy for HPC’ers. It’s a subsidy available to pretty much everybody. It will only benefit the buyers who get in early and those who already own land. I respect your point that it levels the playing field for FTBs against speculators somewhat, but it will just create a new generation of haves and a new level of hyper-indebtedness to which the next generation will have to sink to get on the ladder, as credit expands and prices rise again. It also sets a new standard for government intervention that will be even harder to withdraw from and will make it that much harder for the country to return to a time of positive real interest rates (ie a normal economic environment). It would be madness to raise rates when most people under 40 just took on a 95% mortgage at 5 times salary.

    I am considering it, in spite of saying otherwise yesterday, but I feel like the Prime Minister just put a gun to my entire generation’s head and told us we had to buy a house now. For various reasons, now is a very bad time for me, but if I stick to my original plan of saving for an 18% deposit, I will likely end up buying the exact same house for 10% more, only in 3 years’ time. I would thus be effectively handing over the savings I will have built up to someone else who took advantage of this scheme.

    Imagine, for a second, that this scheme causes such a frenzy of activity amongst FTBs and second-steppers and HPs rise 20% in the next 6-12 months (everyone I know who bought a house for 300k in the last few years could have bought one for 400k if they had been able to borrow 5x salary with a 5% deposit; they were all constrained by the fact they only had about 30k in savings; I don’t see this scenario as that unlikely). What would happen then? Would the government be forced to unwind the scheme ahead of schedule? If that were to happen, I would kick myself for begrudgingly taking them up on this scheme.

    Nevertheless, my options are different to most people here. I live in London zone 2. My area is undergoing far more investment and gentrification than most. The whole country and continent are moving towards the capital. The moment when cash was king was short-lived and I missed it. I suspect it will come again before 2020, as the generation behind mine will have so much student debt. But, when that time comes, it seems unlikely that nominal prices in my area will be lower than they are now.

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  • Reticent, I can see that it’s a tough decision. Buying a first house is always a bit intimidating but perhaps it a bit worse than normal at the moment. My advice would be to take a very deep breath and go for it. My best guess is that you’d have an 80% chance of it being the right decision.

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  • Apologies if that was insensitive. You did say that it was a bad time so maybe you can’t buy right now. If that’s the case then I can imagine that this scheme is a source of frustration

    If you can buy then look at it as the government effectively turning 3 years worth of your future rent payments into a deposit right now. I can see that it’s a gun to your head but it’s like a reverse mugging where they tell you to take their wallet or they’ll shoot you

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  • Flash, Come on the scheme reeks.

    It’s not 2009 and the mortgage market now offers 90%+ loans at historically decent rates, and will improve incrementally over the next 12 months. Even on its own terms the interference is unwarranted. Perhaps if it had been directed at new builds only there might have been a level of credibility, but even then house builders are just going to use it to ramp up prices and improve profits. Pretty much as banks did with QE.

    The country needs more property and greater levels of affordability. This is help like lowering interest rates, or increasing multiples in that its greatest effect will be make property in the round much less affordable, both for those in the market and for those trying to get in.

    It’s a long term train wreck, although I’d recommend that anyone in England out of the market panic buys now.

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  • Bellwether, yes it reeks but the banks can currently only offer a few of these headline 95% mortgages without compromising their tier 1 ratios. The availability of 95% mortgages makes headlines but most people get laughed at when they actually ask for one. This scheme will allow far more people to actually get a 95% mortgage AND the reduced risk to the banks will allow them to price a 95% mortgage like it’s 75% mortgage.

    The recommendation you make in your last sentence is really my point. It stinks but sign up fast.

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  • Perhaps I should explain what I have learnt about this scheme, for you both (I don’t think anyone else is still reading). The broker I spoke to was uncertain on the details, but basically:

    1) It’s a mortgage guarantee. As such, you’re still borrowing the 95% off the bank, and paying them the same interest on the 15% backed by the govt., as you are on the rest of the loan. This may seem obvious, but people seem to be referring to it as an interest-free loan. It’s not. There is an interest-free loan involved in the new-build-only scheme (HTB1).

    2) The rates currently on offer are still slightly worse than the best ones available for 90% LTV loans. The main impact will be to increase the availability of 95% loans, as Flashman says.

    The scheme doesn’t benefit me at all. We can’t borrow against my wife’s income because she only just went freelance. If I can only borrow 5x my own income, my deposit is more like 10%, and I can get a slightly better rate without using the scheme (for now, the whole thing is still pretty fledgling, given it’s been brought forward so unexpectedly).

    So, whilst you are both almost certainly correct in saying that the upshot of this scheme is that we should all buy now, doing so, for me personally, involves engaging in a bidding war with people who earn and have saved much less than me for properties that I wouldn’t even consider renting and I think I have a right to be pretty p&*^ed off about that, both as a taxpayer and a prospective homeowner.

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