MAIN HELP TO BUY MARK2 THREAD -

[koala_bear]

There does seem to be a genuine Catch-22. Anyone stupid enough to sign up for this is clearly a credit risk and should be rejected.

Not necessarily just most trying to sign up and they won't be ones getting the loans.

I can think of several cases where this does work.

For example: Most recent potential FTBs have effectively excluded from buying properties that need a lot of work doing to them as all their cash had to go towards minimising the LTV to even get a mortgage rather than spent on doing the necessary works to the house.

Hence BTLers buying the more neglected properties then doing them up lately.

HTB2 would allow potential buyers to put their savings into doing up the home instead of deposit. The value of the home then in much better conditions shoots up lowering the effective LTV (and hence risk of losses on repo) and employs tradesmen and building materials to do up the property (helps construction and manufacturing sector GDP) as well as VAT take.

I'm wondering if this is actually the aim of HTB2 - very targeted lending liquidity for homes that need doing up. i.e. the effective LTV after the works are done improves by at least 5%.

Edited October 9, 2013 by koala_bear

[FreeTrader]

If you want a laugh:

Needy mid-ranking bankers who can’t afford to live in London could be big users of Help to Buy

Pity the mid-ranking banker on an income of less than £500k ($800k) – he (or she) often can’t afford to buy a house in London. And if he/she does have a house in London, an increasing proportion of his income is eaten up by mortgage payments.

“Our mid-ranking people are struggling,” said the head of HR at one British bank, speaking on condition of anonymity. “They’re in a difficult position – they’ve got families and are targeting a specific lifestyle which is increasingly unaffordable for them. They’re quite vocal about it, especially at compensation time – if you’re earning less than £500k, it’s very difficult to buy a house in central London and to pay school fees for several children.”

While the U.S. housing market plummeted and is mounting a nascent recovery, the UK housing bubble never really popped. As the Economist pointed out last month, the average house price-to-earnings ratio in London remains far above historic norms. The UK government stands accused of pushing prices even higher still through its controversial Help to Buy Scheme - launched today, under which it will underwrite £130bn of mortgages over the next three years.

“People here are already carrying a lot more debt than they used to,” said a senior manager at one European investment bank in London – again speaking off the record. “A member of my team has a £750k mortgage on his house, which is a huge burden for him. A lot of other mid-ranking people here can’t afford to live in Zone 1 and are having to move out to Zones 3 or 4 – which is difficult when you’re a VP-level banker working very long hours.”

As for other Londoners, the crunch point reportedly comes when bankers hit their early 30s and start having families. Until then, they’re happy to live in house shares or small flats conveniently situated in central London. Once they have families, they need larger London properties and aspire to pay private school fees. “People suddenly see their disposable income pared down considerably,” said the European banker. Traditionally, the head of HR says senior bankers would have moved their wives and children into the cheaper British countryside and bought themselves a weekday pied-a-terre so that they could live in London. Now, however, she suggests that bankers’ wives often have jobs of their own and want to continue living in the city – even if they’re not contributing much towards the cost of doing so.

It doesn’t help that bankers took on large mortgages several years ago in the expectation that their pay would keep rising. “My guy who borrowed £750k has seen his compensation coming down year-after-year. It’s very hard for him – he’s spending a significant proportion of his income servicing that debt,” said the senior banker we spoke to.

http://news.efinancialcareers.com/uk-en/152654/mid-ranking-young-bankers-now-priced-out-of-the-property-market/ (H/T FT Alphaville)

[koala_bear]

If you want a laugh:

http://news.efinanci...roperty-market/ (H/T FT Alphaville)

That was another example I was thinking of as they were traditionally big users of IO and then pay the capital done quickly in lumps (bonuses)

[billybong]

“Our mid-ranking people are struggling,” said the head of HR at one British bank, speaking on condition of anonymity. “They’re in a difficult position – they’ve got families and are targeting a specific lifestyle which is increasingly unaffordable for them. They’re quite vocal about it, especially at compensation time – if you’re earning less than £500k, it’s very difficult to buy a house in central London and to pay school fees for several children.”

They should just up sticks and go off to work in Dubai or somewhere.

[FreeTrader]

and anyone willing to guarantee them is equally stupid...specially for 90 "basis points"..0.9% to anyone not trying to impress with their financial savvy.

Saying that, I though 90 basis points was 9%.

I know you're just joking but in case anyone is wondering, those who use 'basis points' aren't trying to be smart-arses, they're simply trying to avoid ambiguity.

If I say: "The 10-year gilt yield rose 1% this morning"...

...do I mean the yield rose from 3.0% to 4.0% (3 + 1)?

...or do I mean the yield rose from 3.0% to 3.03% (3 + 3*0.01)?

If I say "The 10-year gilt yield rose 3 basis points this morning" then there can only be one interpretation (in the example cited it went from 3.0% to 3.03%).

[shindigger]

They should just up sticks and go off to work in Dubai or somewhere.

Quite.

After all they always threatened to.

[thecrashingisles]

If you want a laugh:

http://news.efinancialcareers.com/uk-en/152654/mid-ranking-young-bankers-now-priced-out-of-the-property-market/ (H/T FT Alphaville)

There's a slight reality gap between the figure of £500k annual salary as the cut off point for people who are struggling, and £750k as the size of mortgage that's considered a huge burden. If your income was anywhere close to half a million then a £750k mortgage would be nothing.

[dances with sheeple]

There's a slight reality gap between the figure of £500k annual salary as the cut off point for people who are struggling, and £750k as the size of mortgage that's considered a huge burden. If your income was anywhere close to half a million then a £750k mortgage would be nothing.

Yeah, just sounds like more bleating for bigger bonus, they were part of creating the Ponzi, let them suck up some of the effects, although a banker getting in difficulty with his mortgage is like a baker eating all his own pies, not sure I believe that too many of them are in difficulty, especially on that salary, but if they are playing keep up for schools and lifestyle then maybe. Who cares except them really though?

[cybernoid]

John Redwood is a genuinely intelligent chap in comparison with much of his political party and doesn't toe the essentially liberal David Cameron party line. Unfortunately, I've tried telling him, more than once, that high house prices and enormous mortgages are bad, and got nowhere.

That 'piece' on the website looks as though it was knocked up in 5 minutes, there's a good chance he didn't write it. Home ownership is good for the reasons stated, high prices are a barrier to ownership so the author contradicts themselves. Bizarre commentary, it is nonsensical as it is simply impossible to hold the view that home ownership is beneficial and that high house prices are good at the same time. And yet that is the party line. Anyone trying to defend it will sound ridiculous because it is ridiculous.

[The Knimbies who say No]

Yeah, just sounds like more bleating for bigger bonus, they were part of creating the Ponzi, let them suck up some of the effects, although a banker getting in difficulty with his mortgage is like a baker eating all his own pies, not sure I believe that too many of them are in difficulty, especially on that salary, but if they are playing keep up for schools and lifestyle then maybe. Who cares except them really though?

Take home from half a mill is £275k.

£750k repayment mortgage is around £55k per annum.

Seems like plenty of room for maneouvre before the fishpaste sarnies start appearing.

[zugzwang]

They should just up sticks and go off to work in Dubai or somewhere.

They should be hanging from lamp-posts.

[Liquid Goldfish]

To be fair, if the government hadn't nationalised Northern Rock he would have been correct.

Very true.

I keep forgetting there could have been an alternative path to all the bailouts.

[Liquid Goldfish]

suddenly sentiment changed back to reality..

At the start of this thread, it was all doom and gloom as this HTB was going to send prices to the roof.

Logic argued against....the costs would be added to the risk rate, and there is no money passed to the borrower...Logic says it was nonsense from the off....Logic also says this is a cover for something else....or even just a useless Government feeling that it has to be seen to be doing something....telling the banks to frack off would be the best thing for them to do...

Well, logic to me says that if 80% mortgages are priced at about 3.5% and the 15% government guarantee costs 0.9%, spread over 7 years, then a 95% mortgage could have been priced at about 3.65% - that's what worried me before the rates were announced.

[shindigger]

They should be hanging from lamp-posts.

Aye.

British lamp posts for British scumbags.

[dances with sheeple]

Well, logic to me says that if 80% mortgages are priced at about 3.5% and the 15% government guarantee costs 0.9%, spread over 7 years, then a 95% mortgage could have been priced at about 3.65% - that's what worried me before the rates were announced.

They don`t want all the dross borrowers getting loans though do they, not anymore, they have enough crud on their books as it is, this is to hoover up the absolute cream of the last desperate souls who believe in the mythical "ladder", and to give the politicians a little boost at the polls (they hope) I don`t think it will make much difference either way. My question is; Is this the last bullet in their attempts to prop up property prices, and when it fails, how will they talk their way through the crash?

[Bloo Loo]

Well, logic to me says that if 80% mortgages are priced at about 3.5% and the 15% government guarantee costs 0.9%, spread over 7 years, then a 95% mortgage could have been priced at about 3.65% - that's what worried me before the rates were announced.

thats because the guarantee fee is based on the total loan.

so its not a .9% fee, its a 6% fee for the 15% guarantee...plus margin and likely recovery costs, as even banks dont work for free.

[Liquid Goldfish]

thats because the guarantee fee is based on the total loan.

so its not a .9% fee, its a 6% fee for the 15% guarantee...plus margin and likely recovery costs, as even banks dont work for free.

I get that - but 0.9% over 7 years is only about 0.15% per year - so adding that to 3.5% gives 3.65%.

[19 year mortgage 8itch]

Seen a house come on the market today,

Previously hung around for years, asking price dropping from 300k to about £240k and finally selling in July this year for £220k.

After a makeover, its back on the market for a fliptastic £330k.

Whether HTB works or not, SOMEONE is drinking the government kool-aid.

[Bloo Loo]

I get that - but 0.9% over 7 years is only about 0.15% per year - so adding that to 3.5% gives 3.65%.

I understand where you are coming from, but thats not how banks work.

the lender pays the fee up front...now he isnt going to directly tell you this, but that will be added to the total loan cost, so will charge you that fee on top of the loan you had ( just as they add other fees and charges to the principal borrowed), thus what is only a 0.15% logical cost over 7 years, isnt that at all when it gets sold to the borrower.

[dances with sheeple]

Seen a house come on the market today,

Previously hung around for years, asking price dropping from 300k to about £240k and finally selling in July this year for £220k.

After a makeover, its back on the market for a fliptastic £330k.

Whether HTB works or not, SOMEONE is drinking the government kool-aid.

Hopefully it will sell this time for 180k and the message will keep getting rammed home.

[awaytogo]

I understand where you are coming from, but thats not how banks work.

the lender pays the fee up front...now he isnt going to directly tell you this, but that will be added to the total loan cost, so will charge you that fee on top of the loan you had ( just as they add other fees and charges to the principal borrowed), thus what is only a 0.15% logical cost over 7 years, isnt that at all when it gets sold to the borrower.

I didn't realise that not all lenders have signed up to it yet.

Only 40 % have signed up to it so far.

And of course the Halifax has?

http://www.bbc.co.uk/news/business-24447393

[ReggiePerrin]

Well, logic to me says that if 80% mortgages are priced at about 3.5% and the 15% government guarantee costs 0.9%, spread over 7 years, then a 95% mortgage could have been priced at about 3.65% - that's what worried me before the rates were announced.

If these were priced similar to 80% mortgages why would anyone bother to save up or put down a 20% deposit? 90% mortgages would be more expensive than a 95% mortgage, so who would ever take out one of those? The people with 60% LTV mortgages will expect a bigger saving over a 95% LTV loan, or else why bother? Basically it would destroy the mortgage market if HTB2 loans were priced anywhere near 80% LTV mortgages.

HTB2 is a 95% LTV mortgage with a guarantee, a guarantee that has to be paid for, the risks are still high if the borrower can only scrape together a 5% deposit, so these MMDs should be offered at the highest interest rate, which has to be higher than 90% mortgages

[Quicken]

I didn't realise that not all lenders have signed up to it yet.

Only 40 % have signed up to it so far.

And of course the Halifax has?

http://www.bbc.co.uk/news/business-24447393

RBS and NatWest are offering a two-year, fixed-rate mortgage starting at 4.99% for those with a 5% deposit, with no fee.

Halifax will be taking applications in a few days at a rate of 5.19% with a £995 fee for those with the same deposit.

Doesn't look like Halifax actually want any HTB2 business given those figures.

Edited October 9, 2013 by Quicken

[Liquid Goldfish]

In an article on the FT site yesterday there is a very brief mention that HTB2 does indeed cover remortgages but only to a different lender.

But that's all I can find on remortgaging since the rules were actually announced. I'm really surprised as I thought the remortgaging element would have huge take up.

[TheCountOfNowhere]

i read yesterday...one of the banks was going to extend opening hours for 2 weeks to meet demand for htb!

get in quick!

now, where is that link to the housing market propaganda....