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MAIN HELP TO BUY MARK2 THREAD -


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HOLA441

Fivelive just interviewed a Kate Thorton, property analyst, who spoke a lot of sense.

It appears the govt does not think there is a housing bubble not because of prices but because the number of mortgages are so low. She said a lot and at the end warned that people do not realise how low IRs currently are and that in a couple of years IRs will go up and might go up substantially.

If they put a link up later on to the programme I will post it.

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HOLA442

So, after seeing the announcement on BBC news that this great scheme will start now rather than in January, I actually read up on the details of the scheme:

1. Government lends you 20% of the value of your new house

2. In 5 years time you start paying interest on it, or pay it back (selling the house to do so if necessary)

3. Debt has to be paid off by the time the mortgage is paid off

Hmmm..... I can't actually decide what is going to happen...

1. Very quick rise in house prices, followed by very fast drop in house prices?

2. Continued stagnation of prices at current levels because nobody takes advantage of the scheme?

That is htb! for new builds not htb2 for existing properties.

htb2 will push up prices if there are more qualifying borrowers than properties that they want to buy. Lenders upping mortgages to 95%ltv (80%+15% taxpayer guarantee) will not increase prices if there are not enough borrowers who qualify to borrow more than will support current levels. In other words how many potential borrowers are out there with clean credit s. cores and sufficient incomes who can buy with current prices at 5% deposits but cannot at 20% deposits. That is the key.

Edited by campervanman
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HOLA443
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HOLA444
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HOLA445
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HOLA446

Very quick rise in house prices, followed by stagnation.

Leading to an extension of the scheme (20% becomes 30%, then 40% and so on)

Rinse and repeat.

I agree. This is a scheme to make houses "affordable" by means of taxpayer subsidy. Prices will rise and bigger subsidies will be needed to maintain "affordability". It is insane to use public money in this way. Eventually they will cause a massive crash by withdrawing the subsidy or be perpetually bound to increase it, as it eats up a bigger and bigger share of the public spending. It will be more expensive than the NHS, and no more effective.

Edited by ingermany
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HOLA447

My take for what it is worth. There has been a lot of talk about the economy doing fine etc is the Bof E actually thinking of raising interest rates a little again?

This would be a frightener for the housing market - is he bringing HTB2 in early to counteract this?

Hmmm, interesting thought. They - Carney, Cameron, Osborne, Clegg - would have to do lots of back tracking on repeatedly saying IRs won't rise.

Also, would the UK be the first to do so? I think they will wait until our lords and masters in Washington raise IRs first.

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HOLA448

There's no logic to it in helping to buy, but it will facilitate an increase in consumption due to either lowered interest payments or equity release from remortgaging to a higher loan for a similar monthly payment.

With all the flak that's been directed at HtB you'd expect them to quietly drop this aspect, but if they do allow it then it's an absolute giveaway that they're trying to engineer a pre-election uplift in household spending.

Help-to-MEW

Makes sense. I think a lot of people realise it's not in their interest to buy in at today's prices. The feckless who have over-extended themselves will welcome further hpi, even if it's just so they can spunk the excess on a 4x4 and foreign holiday. They will do this because they've been allowed to.

Much easier to target those already in situ than go through all the hassle of finding new buyers, completing chains etc.

Re-mortgaging muppets the real target audience here?

Edited by ticket2ride
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HOLA449

I agree. This is a scheme to make houses "affordable" by means of taxpayer subsidy. Prices will rise and bigger subsidies will be needed to maintain "affordability". It is insane to use public money in this way. Eventually they will cause a massive crash by withdrawing the subsidy or be perpetually bound to increase it, as it eats up a bigger and bigger share of the public spending. It will be more expensive than the NHS, and no more effective.

Can you explain how lending 95% against a property will cause prices to rise? It is not about whether the taxpayer guarantees 15% or any % it is about the criteria that the lenders use to determine who qualifies to borrow in the first instance.

Edited by campervanman
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HOLA4410

Can anyone find the small print on HTB2? This is from the government website but is very vague. By how much or what percentage are they guaranteeing the mortgae and for how long?

Help to Buy mortgage guarantee

The Help to Buy mortgage guarantee scheme helps people buy a newly built home or an existing property with a deposit of only 5% of the purchase price.

The scheme will be open for loans to existing homeowners, as well as first time buyers. The loans will be available on new and existing houses with a value of up to £600,000.

The Help to Buy mortgage guarantee scheme will increase the supply of high loan-to-value mortgages by offering a government guarantee to lenders who provide mortgages to people with a deposit of between 5% and 20%.

The scheme is not available for those wishing to purchase a second home or buy-to-let.

In July, the Chancellor announced further details of the scheme at a meeting with lenders and house builders.

The Help to Buy mortgage guarantee scheme will be open from 1 January 2014.

https://www.gov.uk/government/policies/helping-people-to-buy-a-home/supporting-pages/help-for-first-time-buyers

Edited by bomberbrown
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HOLA4411

Very quick rise in house prices, followed by stagnation.

Leading to an extension of the scheme (20% becomes 30%, then 40% and so on)

Rinse and repeat.

This can be applied to the wider economy as well.

The increase in debt caused by the bubble is absorbed by the economy and GDP grows. But then the market requires more debt and another bubble is required.

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HOLA4412

Can anyone find the small print on HTB2? This is from the government website but is very vague. By how much or what percentage are they guaranteeing the mortgae and for how long?

Help to Buy mortgage guarantee

The Help to Buy mortgage guarantee scheme helps people buy a newly built home or an existing property with a deposit of only 5% of the purchase price.

The scheme will be open for loans to existing homeowners, as well as first time buyers. The loans will be available on new and existing houses with a value of up to £600,000.

The Help to Buy mortgage guarantee scheme will increase the supply of high loan-to-value mortgages by offering a government guarantee to lenders who provide mortgages to people with a deposit of between 5% and 20%.

The scheme is not available for those wishing to purchase a second home or buy-to-let.

In July, the Chancellor announced further details of the scheme at a meeting with lenders and house builders.

The Help to Buy mortgage guarantee scheme will be open from 1 January 2014.

https://www.gov.uk/g...rst-time-buyers

OK, my own research indicates that the government haven't even decided the finer details themselves yet. Im lost for words.

https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-mortgage-guarantees

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HOLA4413

OK, my own research indicates that the government haven't even decided the finer details themselves yet. Im lost for words.

https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-mortgage-guarantees

There's meant to be an offloading.insuring of the free bit.

I've still seen no sign of what's in place.

I would have guessed that the cost of insuring 20% of a mortgage for someone who cannot afford, would cost more than the IRs at the moment.

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HOLA4414
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HOLA4415

That is htb! for new builds not htb2 for existing properties.

htb2 will push up prices if there are more qualifying borrowers than properties that they want to buy. Lenders upping mortgages to 95%ltv (80%+15% taxpayer guarantee) will not increase prices if there are not enough borrowers who qualify to borrow more than will support current levels. In other words how many potential borrowers are out there with clean credit s. cores and sufficient incomes who can buy with current prices at 5% deposits but cannot at 20% deposits. That is the key.

Quoted so people get to read this very sound comment again.

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HOLA4416

Thanks. So the government are effectively underwriting 15% of the loan. How long for, 25 years? So if property prices rise, the buyer keeps the profit and if they fall the tax payer bails the buyer/banks out. What is up with this country!

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HOLA4417
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HOLA4418

Thanks. So the government are effectively underwriting 15% of the loan. How long for, 25 years? So if property prices rise, the buyer keeps the profit and if they fall the tax payer bails the buyer/banks out. What is up with this country!

The taxpayer bit is at risk only if the borrower defaults. Presumably the fee that the government charges lenders for the guarantee

will be calculated on the basis that x% of borrowers will default. Government and lenders will therefore both have a vested interest in lending only to lower risk borrowers and as I stated earlier it is the number of these relative to the number of sellers that will be key to whether htb2 pushes up prices.

Edited by campervanman
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HOLA4419

Hi all

Like other here I'm deeply suspicious why they have brought this forward and I'm still wanting to know all the details of the actual launched scheme which now so close to launch still don't seem to be finalised!?

However an aspect that has been overlooked in these latest discussions is if in fact current home 'owners' with a mortgage can access this scheme to change their LTV ratio / move to a better deal using this as was a potential unpublicised benefit of this for the masses?

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HOLA4420
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HOLA4421

I was wrong YET AGAIN. I had convinced myself this mental shite would be scrapped.......so they brought it forward. What next.....double the max price to £1.2m???

I wouldn't put it past them. The false confidence caused by HTB1/2 and the forward guidance on interest rates has caused such a massive increase in prices in London/SE that £600k won't buy much at all in certain areas now.

Cameron might say that people outside the M25 don't recognise that there has been a boom, but:

1. Why would they want one anyway? And

2. Why do they think that a blanket scheme like this is good for the whole country if the housing markets are so different?

London was hardly touched in the 'crash' of 2007/8 and has really powered upwards since, but the Tories see no bubble on the basis that hasn't happened in the rest of the country.

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HOLA4422

I agree. This is a scheme to make houses "affordable" by means of taxpayer subsidy. Prices will rise and bigger subsidies will be needed to maintain "affordability". It is insane to use public money in this way. Eventually they will cause a massive crash by withdrawing the subsidy or be perpetually bound to increase it, as it eats up a bigger and bigger share of the public spending. It will be more expensive than the NHS, and no more effective.

Yes, when the IMF makes it a condition of our bailout.

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HOLA4423

The taxpayer bit is at risk only if the borrower defaults. Presumably the fee that the government charges lenders for the guarantee

will be calculated on the basis that x% of borrowers will default. Government and lenders will therefore both have a vested interest in lending only to lower risk borrowers and as I stated earlier it is the number of these relative to the number of sellers that will be key to whether htb2 pushes up prices.

So its a bit like SMI in a way, though with the limit raised to a theoretical £600k mortgage

Surely this has the potential to be abused. Purchase a £600k home with no intention of paying the monthly mortgage in full knowledge the tax payer will pick up your default.

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HOLA4424

Surely this has the potential to be abused. Purchase a £600k home with no intention of paying the monthly mortgage in full knowledge the tax payer will pick up your default.

That has happened all ready. House prices have risen dramatically over the past 6 months as investors buy properties knowing their price will rise under Help to Sell 2. 5-10% profit in months is not bad at all. The bubble will pop eventually, the smart investors will start to get out just as the second stage is brought in.

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HOLA4425

So its a bit like SMI in a way, though with the limit raised to a theoretical £600k mortgage

Surely this has the potential to be abused. Purchase a £600k home with no intention of paying the monthly mortgage in full knowledge the tax payer will pick up your default.

Well yes but why would you?

Assuming that to access a htb2 guarantee mortgage you would need a good credit score then why would you default and lose your £30k deposit on a £600k property and blow your` credit rating at the same time?

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