Jump to content
House Price Crash Forum
Sign in to follow this  
Quicken

Mortgage Strategy: "housing Policy Not Helped By Fsa Rules"

Recommended Posts

http://www.mortgagestrategy.co.uk/analysis/-housing-policy-not-helped-by-fsa-rules/1029396.article

FirstBuy aims to help 10' date='000 buyers over two years - that’s 1% of the normal first-timer market. Applicants will get an equity loan of 20% of the price of a new-build property, funded by the government and builder.

Borrowers need a 5% deposit and the loan will be interest-free for five years, repayable on the resale of the property. The details are important when looking at the scheme in conjunction with the regulator’s affordability approach and views on responsible lending.

Lenders must take into account foreseeable changes in borrowers’ circumstances when assessing the affordability of the loan through its term.

The additional financial cost, for which the FirstBuy borrower will be liable in five years’ time, is presumably such a change and must be taken into account now.

So based on today’s income, those using FirstBuy will have to show they can afford the higher payments and loans not on fixed rates must be stress tested against future interest rate rises.

Will lenders support the scheme if the borrower does not have a guaranteed exit strategy at the end of the preferential period?

And will borrowers’ current financial positions be able to meet their future liabilities to make the lending responsible today?

[/quote']

Interesting analysis of the FirstBuy scheme. Unsurprisingly, the responsible lending concept sounds perfectly sensible to me. I just hope the FSA actually brings in these regulations.

Cheers,

Q

Share this post


Link to post
Share on other sites

"Borrowers need a 5% deposit and the loan will be interest-free for five years, repayable on the resale of the property"

So interest free for five years and then slowly grows and grows if you don't sell....

What rate would it be on after 5 years and how many years before your 20% loan becomes bigger than your original loan to buy the other 75%?

Edited by SarahBell

Share this post


Link to post
Share on other sites

"Borrowers need a 5% deposit and the loan will be interest-free for five years, repayable on the resale of the property"

So interest free for five years and then slowly grows and grows if you don't sell....

What rate would it be on after 5 years and how many years before your 20% loan becomes bigger than your original loan to buy the other 75%?

"The equity loan will be interest-free for the first five years, with interest charged at 1.75% in the sixth year, and at RPI inflation plus 1% after that."

hmm, seems there's a real danger that some may have a very small window for selling in the first 10 years, otherwise the Firstbuy debt+ outstanding mortgage balance is more than the house is worth. I'm trying to knock together a spreadsheet to look at this as it has all the hallmarks of a giant misselling scandal if what I think may happen, happens. Might take a day or two!

Edited by cheeznbreed

Share this post


Link to post
Share on other sites

. I'm trying to knock together a spreadsheet to look at this as it has all the hallmarks of a giant misselling scandal if what I think may happen, happens. Might take a day or two!

Thanks

:)

Share this post


Link to post
Share on other sites

Rpi + 1% that is worse than the old scheme and similar ones run by developers. What happened to basing everything on cpi?

Share this post


Link to post
Share on other sites

So "the normal first-timer market" is one million? :blink:

I am not sure when exactly they are comparing to, but it's over two years according to the article so that's 500,000 or roughly 42,000 pcm.

Q

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.