MAIN HELP TO BUY MARK2 THREAD -

[Snugglybear]

From the Grauniad http://www.guardian.co.uk/money/2013/jul/22/credit-history-help-to-buy-property-buyers

Many people with blemishes on their credit files will be barred from a £12bn government scheme to boost lending to homebuyers with small deposits, it was revealed on Monday.

Those keen to benefit from the second part of the Help to Buy scheme, due to come into effect in January 2014, will also be subjected to income checks and "stress testing" to ensure they can afford the new "guaranteed" mortgages, ministers will say. They will also have to sign a declaration that the purchase is not a second home.

The chancellor, George Osborne, is hosting a breakfast meeting with lenders and builders to discuss the scheme's "mortgage guarantee" element, which is aimed at enabling many more people to obtain a home loan without the need for a prohibitively large deposit.

The first part of the scheme, launched in April, involves giving loans to homebuyers that can be used for a deposit on a new-build property. Until now there has only been limited information available about the second, larger, part of the initiative, which will see the government make available £12bn of guarantees to lenders – enough, it believes, to support £130bn of mortgages with the buyer paying a deposit as low as 5%. Ministers have claimed the scheme could guarantee up to 190,000 mortgages a year over three years.

In recent years most of the lowest interest rates available have been on mortgages of up to 60% of the property's value, effectively shutting out first-time buyers without substantial cash backing. The new scheme, to run for three years, will see the government give lenders who offer low-deposit mortgages the chance to buy a guarantee on the portion of the mortgage between 80% and 95%. If a borrower gets into financial difficulty and their property is repossessed, the government will cover a chunk of the lender's losses.

For example, a family buying a £300,000 house would still have to put down a deposit of (at least) 5%. They would take out a 95% mortgage from a bank or building society, which means they would borrow £285,000, of which the first £45,000 would be covered by the government guarantee.

Lenders will have to pay a fee for each mortgage guaranteed, and this has yet to be finalised.

The Treasury said banks and building societies were being given more detailed information about the mortgage guarantee part of the scheme so they could prepare for next January.

A spokesman said that under these rules, would-be borrowers would not be able to access the guaranteed mortgages if their credit history did not meet the Financial Conduct Authority's "impaired credit" standards. Someone who had a county court judgment against them for more than £500 and related to the previous three years would be barred.

He added: "Borrowers must be able to afford the mortgages, with income verification and stress testing as set out in the FCA's mortgage market review."

The Treasury said that the fee charged to lenders would be based on LTV bands and finalised following discussions with lenders. "It will be set to encourage as many lenders as possible to participate in the scheme, while protecting the taxpayer," it added.

It was also confirmed that people will not be able to use the scheme to buy second homes, with lenders required to collect a declaration stating that the borrower has no interest in a property anywhere else in the world. It will not be possible to use Help to Buy in conjunction with any other government home-buying scheme.

They haven't yet fixed the fee that will "protect the taxpayer". In a bit of a bind, I expect, because if they set it at a realistic level, no lender will pay it. Anyone think they'll set it at a level where the taxpayer will be well and truly on the hook if it all goes pear-shaped?

Still, borrowers will have to declare that they don't already have an interest in any other property, and no-one would ever lie, so that's alright then.

Then there just remains the problem of people actually having large enough incomes to pay the humungous mortgage even if interest rates should rise ("income verification", "stress testing"). Not to worry, I'm sure they'll find a way round that.

[DTMark]

This bit (italics mine)..

It will not be possible to use Help to Buy in conjunction with any other government home-buying scheme.

..is utterly priceless. It's like a fecking money-off coupon.

[jonpo]

FT Front page today !

I didnt realize it would be universal! no wonder the housebuliders are all rallying...

"The £12bn mortgage guarantee scheme, which will launch in January 2014, will give buyers of all properties – not only new build – the ability to borrow with only a 5 per cent deposit. The government will guarantee a proportion of the home loan as an insurance policy for the banks, as long as the property is valued at less than £600,000. Existing homeowners can also use the scheme to remortgage their property."

say goodbye to a crash for 5-10 years.... this bubble has legs.

[Sir Harold m]

I know, people on £100k a year and above can get help to buy houses, its nothing more than a subsidy to an already overpriced asset market.

I will never vote Tory again , I'd sooner vote for Galloway or Bob Crowe

[Imminent_plunge]

FT Front page today !

I didnt realize it would be universal! no wonder the housebuliders are all rallying...

"The £12bn mortgage guarantee scheme, which will launch in January 2014, will give buyers of all properties – not only new build – the ability to borrow with only a 5 per cent deposit. The government will guarantee a proportion of the home loan as an insurance policy for the banks, as long as the property is valued at less than £600,000. Existing homeowners can also use the scheme to remortgage their property."

say goodbye to a crash for 5-10 years.... this bubble has legs.

£600k sounds perfectly reasonable for an FTB property, just over 20x average income, proved historically to be utterly affordable

[thecrashingisles]

£600k sounds perfectly reasonable for an FTB property, just over 20x average income, proved historically to be utterly affordable

Those are for First Time Bankers.

[MrB]

There will be enough takers of this scheme to prevent sellers from lowering prices. Only takes a few idiots to use it consolidate prices at the margin.

[Monkey]

Existing homeowners can also use the scheme to remortgage their property.

This is the kicker, if you can rustle up the 5% deposit/equity then the 20% loan/share of the hous proffit will be forgotten about. Its a 5 year can kick for people.

BTL as well?

Edited July 23, 2013 by Monkey

[frederico]

Houses are obviously the banks only collateral.

Unfortunately other factors are going to over whelm any housing market ramping.

[thecrashingisles]

This is the kicker, if you can rustle up the 5% deposit/equity then the 20% loan/share of the hous proffit will be forgotten about. Its a 5 year can kick for people.

So you legislate for fixed-term parliaments to take the politicking out of election date decisions, then introduce policies timed to blow up when the other lot are due to face the ballot box...

Osborne has so much in common with Brown it's unreal.

[olliegog]

'For example, a family buying a £300,000 house would still have to put down a deposit of (at least) 5%. They would take out a 95% mortgage from a bank or building society, which means they would borrow £285,000, of which the first £45,000 would be covered by the government guarantee.'

this bit worries me

is it only families (or is that just sloppy speak for households but sounds more friendly)

will the income test include the guaranteed bit - 5 times salary to be £285K or £240k?

how will they verify that the 'signed' undertaking they do not have another home be verified ? what if it is abroad ?

bank of mum and dad gets a free loan instead of shelling out for a deposit?

[cool_hand]

http://www.bbc.co.uk/news/business-23412585

The Chancellor, George Osborne, has called housebuilders and mortgage lenders to a meeting to discuss how the second part of the Help to Buy scheme will work.

The first phase of the scheme was launched four months ago and provides equity loans for buyers of new homes.

The next stage, to be brought in in January next year, will involve help for buyers of existing homes.

It will allow people to buy with just a 5% deposit.

The scheme is aimed at enabling more people to buy their homes.

The government will guarantee a proportion of the loan to give the banks greater confidence to lend.

Bubble fears

Properties of up to £600,000 will come under the plans, although foreign buyers with no history of property owning in the UK, buyers of second homes and buy-to-let landlords are, in theory, excluded - although there are no formal checks to prevent this.

The biggest lenders, including Lloyds, RBS, Barclays and Nationwide, are being called into Number 11 to be to told to get ready for the launch of the new scheme.

With them will be representatives of the main housebuilding firms - many of whom say that a boost to the housing market will have the knock-on effect of spurring them on to build more homes.

Last month, the housing industry said the housing scheme had got off to a "flying start".

But some housing experts have warned that the guarantee could create a new housing bubble.

The former governor of the Bank of England, Sir Mervyn King, said the scheme should not be extended.

For his part, the chancellor is expected to tell lenders to apply stringent testing to borrowers to check they can afford repayments - and prevent a surge of reckless lending.

[19 year mortgage 8itch]

This is the kicker, if you can rustle up the 5% deposit/equity then the 20% loan/share of the hous proffit will be forgotten about. Its a 5 year can kick for people.

BTL as well?

Not for BTL but needs terms to prevent "rent it out instead".

Also not an equity loan but a loan guarantee, I.e. high LTV, lower rate.

Edited July 23, 2013 by 7 Year Itch

[righttoleech]

Did twunt Osborne not study Tulips in his history class?

[Timak]

This policy is already destroying the resale market for new build homes.

Cambourne in Cambridgeshire is a new-town with several thousand rabbit hutch houses, too many bathrooms and not enough gardens or parking, but also the only affordable family housing close to Cambridge.

Under this scheme you can buy a 4 bedroom house "worth" £300k with a 5% deposit and a mortgage for £235k.

If you want to buy one of the many available 4-5 bedroom houses for resale, also priced at £300k, then you'll need a 20% deposit and a £240k mortgage. Which rules out 90% of buyers.

Nobody will buy the existing house at the same price in those circumstances. So in fact you'll see the prices of new builds effectively undercutting the houses already owned by members of the public. Saves builders yes, but leads to massive negative equity for the owners of nearly new houses.

[simon99]

This was the reason I gave in and bought.

[Venger]

I know, people on £100k a year and above can get help to buy houses, its nothing more than a subsidy to an already overpriced asset market.

I will never vote Tory again

Non-owners have shouldered all the years of out-of-control HPI, then policy after policy and scheme after scheme, to support and reflate prices. To support the heavy mortgage debtors, and the asset values of older owners who've seen the biggest gains over the decades.

They must have done their polling projections for the votes their Help-To-Buy will bring in, unless it's mostly based on personal gain. They'll win votes from the the people Merv shows most concern about; people in their 30s and 40s with jumbo mortgages. Also many older owners who don't want to see their homes fall in value, and to hell with anyone else.

Yet there's plenty of annoyed pensioners out there, including home-owners, more concerned with low savings rates and subsidising debtors. Others who care less about what their homes are worth and don't want their own younger grandchildren taking out huge debt.

The private rented sector has grown by 72 per cent since 2001 and there are now over nine million people in England renting privately. The renting population has also changed. A third of renting households are families with children, and half of households renting are 35 or older.

[chronyx]

What's the forum opinion on the wider effect of this? I wonder if this will do nothing more than knacker the whole house price based economy, having seen the other thread saying MEW is back.

[@contradevian]

What's the forum opinion on the wider effect of this? I wonder if this will do nothing more than knacker the whole house price based economy, having seen the other thread saying MEW is back.

With any luck. Yes.

[Bradbury Robinson]

http://www.bbc.co.uk/news/business-23412585

Properties of up to £600,000 will come under the plans, although foreign buyers with no history of property owning in the UK, buyers of second homes and buy-to-let landlords are, in theory, excluded - although there are no formal checks to prevent this.

[57percent]

Although I'm concerned about the market generally, I'm still not convinced this is anything but a token gesture.

It's a guarantee of part of the mortgage (5% buyer, 20% govt, 75% bank). What would that product currently cost the bank? 10%? In which case this is £1.2bn of free products for the banks. We don't know what the charge will be, but at least part of that £1.2bn.

It's nothing to do with FTB, or even buyers. Much like FLS/FFL, it's designed to bring down the mortgage costs for those with high LTV.

It will kill the housing market as anyone on the fringes who might have to sell, probably won't have to now.

It might support prices, but just a small addition to the massive QE, ZIRP and FLS.

It's got absolutely nothing to do with building more houses.

[Tin Foil Hat]

Sounds like a housebuilder bailout and if there's anything left the rest can have it.

What are the links between Tories and housebuilders?

Smells corrupt to me.

[Bloo Loo]

There will be enough takers of this scheme to prevent sellers from lowering prices. Only takes a few idiots to use it consolidate prices at the margin.

Why do you say that?

Councils and Local authorities have been running the exact same scheme for 18 months now in some cases.

The whole scheme still depends on borrowers magically coming to the market, with salaries to meet the stress tested lending criteria.

And Borrowers with quality histories are becoming harder and harder to find..

Edited July 23, 2013 by Bloo Loo

[lastlaugh]

Why do you say that?

Councils and Local authorities have been running the exact same scheme for 18 months now in some cases.

The whole scheme still depends on borrowers magically coming to the market, with salaries to meet the stress tested lending criteria.

And Borrowers with quality histories are becoming harder and harder to find..

I agree with this. In fact sellers will actually now be able to afford to lower prices because they wont need such a high LTV for their next purchase.

And this still all relies on a wave of FTBers willing and able to join the bottom of the ponzi. As in the Cambridge illustration a few posts above, FTBers are better off with the New-Build part of the scheme. And I'm not convinced of the media myth of "pent up demand" of FTBers.

Also, as I understand it, the guarantee is not for mortgage arrears but to indemnify the lender in case of repossession and the property has lost value. So the guarantee is useless until the banks have repossessed the property. In the medium term this guarantee creates an incentive for banks to go for repossession rather than forebearance. I see a lot of unintended consequences in this scheme.

[Bloo Loo]

You see, Parliament is designed to make laws.

Its not really able to thrash through a Policy Argument about spending.

the proponents have to thrash this type of policythrough...the make an announcement about the aims of the scheme, an outline of costs and submit it to the House...This cant be a full working model as the other side will argue about policy, and try and arrange for bad political fallout on the proposer...so what we end up with is not a thought out technically correct scheme, we end up with a half hearted quango creating mish mash of nonsense....all sexed up in the news.

This is different to passing a law for a persons actions to be halted or forced....you know...most people die if struck by a vehicle at 40MPH, but most do not at 30MPH...it makes sense then to pass a law to attempt to reduce speeds in areas where people are likely to meet a car.

however, no legislation prevents lawbreakers from still doing the thing they were trying to prevent.

SO here we have a scheme, ill thought out, pulled apart in public, and today, they are meeting with the beneficieries of this largess and amongst themselves are discussing how it will all work...to EACH SIDES MUTUAL ADVANTAGE.

In my view, this meeting is a sign of severe CORRUPTION.