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MAIN HELP TO BUY MARK2 THREAD -


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HOLA441
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HOLA442

The facts might not be precise, but the sentiment is certainly there. It's obvious what the view will be on HPC, but Mumsnet represents the average Joe (or Jo).

http://www.mumsnet.com/Talk/in_the_news/a1867093-so-th-ill-conceived-help-to-buy-scheme-will-now-start-this-week

Yep sentiment has certianly changed

The only one`s that see HTB in a positive light are the VI`s

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HOLA443

Peston on HTB2 fee structure (meant to be made public tomorrow)

http://www.bbc.co.uk/news/business-24427274

It will be interesting to see wherther Peston is right that the availability of high LTV loans is the problem or whether it is actually the availability of creditworthy potential borrowers (i.e. verified income and all the MMR recomendation for post April 2014).

I was just about to post that Peston's figures don't make any sense at all, but I see he's now updated his piece to correct his error.

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HOLA444

I was just about to post that Peston's figures don't make any sense at all, but I see he's now updated his piece to correct his error.

I see he has now changed it to be in-line with what this thread is expecting - interest that he has finally noted in the correction that HTB2 = Help for banks too - given the way they will be minting it.

Perversely I do wonder if certain lenders might actually be able to put up rates on existing higher LTV products outside HTB2.

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HOLA445

I repeat what I said on 30 Sep: a 0.9% one-off fee for the guarantee on a 95% LTV mortgage seems cheap to me.

If this turns out to be the fee then Banks ought to be able to offer pretty low rates on 95% mortgages.

In post #761 I showed the rates for mortgage insurance in Canada and Australia (although I gave some reasons why they aren't strictly comparable).

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HOLA447

http://www.bbc.co.uk/news/business-24427274

Here is a bit more detail about how Help to Buy ll will work after it is launched by the Treasury on Tuesday.

I am told that the Treasury has told the banks it will charge them a supposedly "commercial" rate of about 0.9% for insuring up to three-quarters of the first 20% of losses on mortgages for homebuyers who cannot afford to provide a big deposit.

And apparently that 0.9% applies to the whole loan, not just the insured proportion.

The charge is necessary to prevent Brussels ruling the scheme as illegal state aid.

But it implies that Help to Buy ll could be quite a money-spinner for the Treasury. The government could receive annual revenues of just under £12bn a year (see update below please), if it were to provide guarantees on the maximum £130bn of mortgages it estimates that it could insure.

As one banker said to me: "Unless the mortgages go sour, the Treasury will clean up."

..

Well, if banks are currently charging 3.5% interest on a tracker loan, where the buyer has borrowed 75% of the value of the property (a 75% LTV), the minimum the banks would feel they could charge for the equivalent new taxpayer-insured mortgage would be 4.4%.

But, in practice, the banks will feel they need to charge a bit more even than that, because they are not transferring 100% of the top risk to taxpayers.

More of Peston at the link.

And there's no risk of the mortgages going sour is there not in the in the UK where property prices always go up!

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HOLA4413

This scheme applies to repayment mortgages only? Far away from the 125% I.O days then, not much bubble going to come out of it, just some people will get to borrow for their "own" home?

Freetrader posted this chart on another thread a little while back.

It shows LTVs for FTBs dropping during the New Labour bubble from an average of 95% to 90% - which is at odds with what many of us say, which is that everyone was taking out 100% and higher LTV mortgages.

Anyway, I just found it surprising.

FTB_LTV.gif

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HOLA4414

The facts might not be precise, but the sentiment is certainly there. It's obvious what the view will be on HPC, but Mumsnet represents the average Joe (or Jo).

http://www.mumsnet.com/Talk/in_the_news/a1867093-so-th-ill-conceived-help-to-buy-scheme-will-now-start-this-week

The majority of posters on that thread seem very down on it...

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HOLA4415
"Unless the mortgages go sour, the Treasury will clean up."

This time next year Rodney, we'll be millionaires.

I love the logic of this whole thing- the banks-who are supposed to be the experts in risk assessment- demand high deposits based on their view that the risk of default is high in the future- this is the way the market is supposed to operate- money is priced according to the risk involved.

But the Tories decide that all that 'free market' stuff is just getting in the way so they decide to jump in and take on that risk on behalf of the taxpayer anyway.

And then we are told that 'if' the mortgages don't go sour they will 'clean up'? Well yes-obviously- if you take a big risk and it pays off you stand to win big- but this is exactly the mindset that got us into our current mess in the first place.

So instead of the Government acting to constrain the banks they are out in front of the pack screaming 'Come on!!- lend more f*cking money!!!'

You could not make this sh*t up.

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HOLA4416

FWIW I was at a public meeting today attended/chaired by Nick Boles, and was able to ask him:

You've talked a few times about the 'average person' not being able to afford 'an average home' in many areas. What chance do you think you have of succeeding in making this a reality when Government policies like Help to Buy are specifically designed to prevent it from happening?

Boles gave a very polished answer telling me about the only other route was the nationalisation of the building industry else builders will not build if people cannot pay the prices asked. :rolleyes: (there were even a few supporting voices to this point I think) He said that Help to Buy is "essential" to sorting supply-side issues.

It was a bit off-topic (the meeting was about planning) but Boles brought the subject up himself so I felt able to ask the question.

Edited by The B.L.T.
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HOLA4417

FWIW I was at a public meeting today attended/chaired by Nick Boles, and was able to ask him:

Boles gave a very polished answer telling me about the only other route was the nationalisation of the building industry else builders will not build if people cannot pay the prices asked. :rolleyes: (there were even a few supporting voices to this point I think) He said that Help to Buy is "essential" to sorting supply-side issues.

It was a bit off-topic (the meeting was about planning) but Boles brought the subject up himself so I felt able to ask the question.

After you have de facto nationalised the mortgage industry (hello RBS, Lloyds, Halifax and now HtB I'm looking at you), is nationalising the building industry much of a stretch?

Or do we only nationalise the losses and privatise the profits?

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HOLA4419

After you have de facto nationalised the mortgage industry (hello RBS, Lloyds, Halifax and now HtB I'm looking at you), is nationalising the building industry much of a stretch?

Or do we only nationalise the losses and privatise the profits?

Exactly, it was an absurd answer. It was rapid fire Q&A so I didn't have a right of reply, and as it was a bit off topic I wouldn't have taken one but I couldn't let the opportunity pass to let him know that not everyone is impressed with this idiocy.

I was a bit surprised by Boles' enthusiastic backing of HTB, I was hoping to get an impression he actually thinks it's a crap idea, but nope..

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HOLA4420

I was being hard on Milliband the other day RE: some of the things he's said in opposition, and somebody pointed out "at least he's saying something a bit different. Cameron agreed with most of New Labour's spending plans and policies in opposition - can't remember any policy he had other than saying the word 'immigration' and 'change' a lot actually. And people wonder why not much has changed."

Good point well made I thought. Thatcherism and trickle down continues at pace with this dim lot.

I want Red Ed in now (but only if he's actually going to revert to a bit of old Labour) in the hope we lose all this centre ground globalism nonsense we've had for 30yrs.

If the Mail hates him that's a pretty good start isn't it?

Edited by byron78
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HOLA4422

FWIW I was at a public meeting today attended/chaired by Nick Boles, and was able to ask him:

Boles gave a very polished answer telling me about the only other route was the nationalisation of the building industry else builders will not build if people cannot pay the prices asked. :rolleyes: (there were even a few supporting voices to this point I think) He said that Help to Buy is "essential" to sorting supply-side issues.

Did no builders ever build when houses were affordable then?

I don't see much difference between handing tax money to the builders via government owned bank lending & schemes and nationalisation of the building industry, except that would be cheaper.

Why do they not suggest builders sell their wares for the market price?

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HOLA4423

Boles gave a very polished answer telling me about the only other route was the nationalisation of the building industry else builders will not build if people cannot pay the prices asked.

In other words, they're over-leveraged and paid too much for land? There is a solution for that, you know...

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HOLA4424

In other words, they're over-leveraged and paid too much for land? There is a solution for that, you know...

Yes, a taxpayer baleout allowing them the luxury of enough time to find a mug FTB to offload the liability onto, trousering record margins in the process.

"iisss the correct answer!"

It'll only be in 'istry books that tales of such practices like liquidation, write-downs and distressed asset sales to new entrants take place.

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HOLA4425

Freetrader posted this chart on another thread a little while back.

It shows LTVs for FTBs dropping during the New Labour bubble from an average of 95% to 90% - which is at odds with what many of us say, which is that everyone was taking out 100% and higher LTV mortgages.

Anyway, I just found it surprising.

FTB_LTV.gif

A paper yesterday (Guardian IIRC) said that the Treasury is going to release a study that uses the above CML median LTV data to deflect criticism over HTB2. They apparently intend to show that all the Government is trying to do is 'return the market to normal'.

What I'm sure they'll neglect to mention is that these high LTV ratios applied at a time of much lower loan-to-income (LTI) multiples. FTBs in the 1980s and 1990s were only borrowing between 1.8x and 2.3x income. The risk for lenders was much lower.

At these LTI multiples the mortgage payments were quite low as a percentage of income, except for the peak of the boom in 1989/90. Throughout most of the 1990s initial mortgage payments accounted for less than 15% of a FTB's income.

CML_2005a.gif

(The charts above are from the CML Housing Finance issue 06/2005.)

Last week on the Radio 4 programme about HTB2 (see this thread) we had a guy in London contemplating taking a £285,000 95% LTV mortgage with his partner - 70K joint salary (roughly 4x income). At an interest rate of 4.5% this would mean annual mortgage payments of 19K for a 25-year term, or 27% of gross income – the same as at the height of the last boom.

We don't know yet if HTB2 lenders will allow mortgage terms beyond 25 years – if they do then they're taking on more risk because the govt guarantee only extends for 7 years.

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