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Htb - Ticking Bomb?

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Managed to get myself signed up to some RM junk and received a promotion from a home builder for some new builds. I'd not really paid much attention to what was going on regarding HTB, but found the way this advertisement was worded to be quite deceptive and designed to make it look like a discount rather than more debt that in 5 years time would cost real money (at present rates with repayment around 200-400 a month extra required in year 6).

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Whats the plan with these? Do mortgage providers intend to allow the HTB loan to be rolled in to the 'main' mortgage in 5 years? Do they take repayment of these loans in to account when calculating affordability? Is it the next miss selling scandal that will lead to the Government forgiving these loans to the feckless who made no plans what so ever to deal with them? Do buyers think their wages are going to increase to cover the repayment of, what is in effect, a second mortgage albeit with an interest free period?

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I have had a few friends use Help to Buy and so looked into how the equity loan works - and was quite shocked about how brutal it seemed when you are out of your 5 year window.

You effectively have 2 mortgages and need to service both if I have followed it correctly.

If you fiddle the system and are in a position to save and pay off the Equity Loan after the 5 years, then think you could do quite well out of it as an interest free loan - so suits the upper end buyer, but if not, looked to be a total trap to me.

Have only looked at the shallow end of the deal, but my initial reaction was 'it's a trap!'

(Although, if we do get a HPC then this may help you pay back the Equity Loan - so maybe everyone is betting on prices falling to make it make sense :-)

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I have had a few friends use Help to Buy and so looked into how the equity loan works - and was quite shocked about how brutal it seemed when you are out of your 5 year window.

You effectively have 2 mortgages and need to service both if I have followed it correctly.

If you fiddle the system and are in a position to save and pay off the Equity Loan after the 5 years, then think you could do quite well out of it as an interest free loan - so suits the upper end buyer, but if not, looked to be a total trap to me.

Have only looked at the shallow end of the deal, but my initial reaction was 'it's a trap!'

(Although, if we do get a HPC then this may help you pay back the Equity Loan - so maybe everyone is betting on prices falling to make it make sense :-)

A couple of things to consider about a trap...

1. If you buy a small place using it and then need more space, how can you afford to do it? If your small place increases in price, presumably so will a larger one. When you sell yours, you repay the equity loan and have a wider gap to finance., 20% won't cut it on the next one.

2. Who is going to be able to afford to buy your little rabbit hutch at the full price when you want to sell, as the equity loan only applies to new builds not existing houses?

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It's to get you on the housing ladder before you can afford it. In the 5 years you get promoted every year until you can easily afford the extra payments, that's a plan anyway.

The whole system really relies on wage inflation which won't help the productivity gap.

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Going back to 2003 would be a better help than this. 2 miles down the road from where this development is I bought a perfectly serviceable 2 bed for £36k.

I can imagine a lot of buyers using HTB going bankrupt when the 5 years are up.

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It's to get you on the housing ladder before you can afford it. In the 5 years you get promoted every year until you can easily afford the extra payments, that's a plan anyway.

The whole system really relies on wage inflation which won't help the productivity gap.

Doesn't it require on real wage increases which to be blunt hasn't really been the case for the past 15-20 years

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Doesn't it require on real wage increases which to be blunt hasn't really been the case for the past 15-20 years

That depends on what you think the motive is behind it and whether it's to "help" people or the builders, bankers and governbankment to the fruits of their labour.

If people are trapped in rabbit hutches with 35, 40 (or 50) year joint income mortgages around their neck, the builders will have banked their profit on the inflated price. The bankers and governbankment have the people right where they want them. If wage rises lead to an interest rate rise, the wage rise is sucked up by the bankers via the mortgage interest increase, so no increase in disposable income and standard of living. The governbankment have two wage earners paying two lots of tax until they drop and no housing benefit to pay because they aren't renting.

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We should start seeing the effect in summer 2018, so not long to wait. I wouldn't be surprised to see some stories of woe hit the papers towards the end of that year.

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I don't recall precisely, but can't people just walk away without much fear of havibg to pay it back? Obviously this would leave the FTB back at square one but...

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The very idea of a situation arising where the government is directly responsible for people having their properties repossessed is just laughable and completely unthinkable... it's the complete opposite of what government and boe policy has been for longer than I now care to remember.

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It is a ludicrous situation.

It's as if the Dutch government had introduced a 'Help to Buy' scheme for young people to get onto the 'Tulip ladder' in the 17th century. I'm sure there was anxiety generally back then that young people mightn't be able to afford ever to own a tulip. Maybe some parents or grandparents were in a fortunate enough position to help the younger generation get their first tulip.

I'm not sure if the government did intervene back then to help those who couldn't ordinarily afford a tulip to get one. But I'm sure if they had significant tax revenues from tulip sales, if ministers had 'buddies' in the tulip business, or if their electoral success depended on the ever rising price of tulips, perhaps they did.

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One word for you...

Debtforgiveness

... just you watch.

They'll do something but not quite that...

The very idea of a situation arising where the government is directly responsible for people having their properties repossessed is just laughable and completely unthinkable... it's the complete opposite of what government and boe policy has been for longer than I now care to remember.

Exactly, it'll never happen.

What I expect is some sort of government shared equity scheme: the government take a x% stake in the house this will need to be repaid when the house is sold. If they are worried about an HPC then the government might set a minimum repayment of the £x,000 loan plus variable APR at inflation or BoE base rate + y%.

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Has anyone reading this got a good word to say about HTB?

(looking from the perspective of the buyer)

Would be interested to know the up sides, or hear from people who are happy with it.

I would be very nervous about having a deferred loan that raises with house prices in a time of low wage inflation, particularly on new-builds that are not great at resale anyway - but would be cool to hear a different opinion of how it might work out well.

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The very idea of a situation arising where the government is directly responsible for people having their properties repossessed is just laughable and completely unthinkable... it's the complete opposite of what government and boe policy has been for longer than I now care to remember.

I dunno - it could be genius way of obtaining new council houses :-)

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Would be interested to know the up sides, or hear from people who are happy with it.

The upside is that the developer gets more than it otherwise would. Also, the bank does not have to take such a risk, as that is borne by the government.

So I would say the banks and developers are happy.

Also, our current Conservative MPs are probably happy, as it has inflated house prices, which has helped them get elected or re-elected.

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Has anyone reading this got a good word to say about HTB?

(looking from the perspective of the buyer)

Would be interested to know the up sides, or hear from people who are happy with it.

I would be very nervous about having a deferred loan that raises with house prices in a time of low wage inflation, particularly on new-builds that are not great at resale anyway - but would be cool to hear a different opinion of how it might work out well.

The only way I could see it being an advantage to the buyer is if they MUST have a new build and already had the capital, why not use that money to make more elsewhere and let the Government lend you some for 5years interest free? At the end of the 5 years just pay it back. How many are going to have the capital though? How many have any idea how to repay it in 5years?

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Has anyone reading this got a good word to say about HTB?

(looking from the perspective of the buyer)

Would be interested to know the up sides, or hear from people who are happy with it.

I would be very nervous about having a deferred loan that raises with house prices in a time of low wage inflation, particularly on new-builds that are not great at resale anyway - but would be cool to hear a different opinion of how it might work out well.

yeah, it's f**king genious.

Using peoples future taxes, the taxes of their children, their lives effectively to get them to borrow more and more from a set of bankers that should have been in Jail in 2007.

The men who introduced HTB1/2 and FLS have made 100's of 1000's of £££s in untaxed unearned equity, eclipsing their poultry 6 figure ministerial salaries ( did I mention its all tax free ), HTB1 is even more brilliant ( read as evil ) because it's pushed uop new build houses and made the house builders a fortune ( again they shoudl have been out of business in 2007 )...the genius bit is the house builders funded the tory party election campaign.

As I said, f**king genuius....but not in a good way.

The best bit was calling it "Help" to buy....when it's actually "Help to prop up the rich".

f**king 100% total criminal genius.

And people total f**king morons have gone for it.

ALL, IMHO.

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The upside is that the developer gets more than it otherwise would. Also, the bank does not have to take such a risk, as that is borne by the government.

So I would say the banks and developers are happy.

Also, our current Conservative MPs are probably happy, as it has inflated house prices, which has helped them get elected or re-elected.

I fear that this is still true...

Despite the inceased grumbling we hear about high houses prices when buying many many owners will be happy to see the price of their own house increase. They'll moan that their children can't afford to buy to happily accept that their own house is worth more. We've all heard/read anecdotes about Mr & Mrs Wayne Kerr wanting the maximum price for the house they are selling but minimum price for the house they are buying.

Cognitive dissonance anyone?

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yeah, it's f**king genious.

Using peoples future taxes, the taxes of their children, their lives effectively to get them to borrow more and more from a set of bankers that should have been in Jail in 2007.

The men who introduced HTB1/2 and FLS have made 100's of 1000's of £££s in untaxed unearned equity, eclipsing their poultry 6 figure ministerial salaries ( did I mention its all tax free ), HTB1 is even more brilliant ( read as evil ) because it's pushed uop new build houses and made the house builders a fortune ( again they shoudl have been out of business in 2007 )...the genius bit is the house builders funded the tory party election campaign.

As I said, f**king genuius....but not in a good way.

The best bit was calling it "Help" to buy....when it's actually "Help to prop up the rich".

f**king 100% total criminal genius.

And people total f**king morons have gone for it.

ALL, IMHO.

Oh aye, don't get me wrong - I cannot see any good side of the scheme from a wider society point.. pouring tax payers money (in a time of ausenity no less) into the Housing Market when there is already literally tonnes of money slushing around in a bubble-like fashion already seems pretty crazy.

But the weird bit is that it seems terrible for the buyer as well - but there presumably are people out there who've read all the small print and decided it was a good idea for them, and would be interested to know why. The only way I can see is having a lump sum to pay off the Equity Loan (or the normal mortgage) at the 5 year point and so using as an interest free loan - but there are enough people who taken it up and so they must have an idea of why its a good thing for them.

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One word for you...

Debtforgiveness

... just you watch.

lol! not at all what the PTB have in mind.

debtors prisons would be more appropriate.

matters not that there was artificial inducement to get into debt(also selling off the countries assets at below market value)

the elite think they will be ok, but they did at the time of the french revolution/corn laws /enclosures act etc.

they are in for a rather rude awakening.

this sort of thing ALWAYS happens on a fairly regular 350 year cycle in this country.and it is quite normal for the landed gentry to find they have overplayed their hand somewhat.

we tend to be a little more polite about seeking recompense than the continentals

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Has anyone reading this got a good word to say about HTB?

(looking from the perspective of the buyer)

Would be interested to know the up sides, or hear from people who are happy with it.

I would be very nervous about having a deferred loan that raises with house prices in a time of low wage inflation, particularly on new-builds that are not great at resale anyway - but would be cool to hear a different opinion of how it might work out well.

Yes, HTB is a 'shared ownership' type scheme and not really a loan. A work colleague realised his mistake getting into on at 20% and has sold his new build slave box to find that he had to get a gov't credited HTB surveyor to assess the current value of the property (£150 ish) and resolve any capital revision (up or down, plus prevent fraud). The process is supposed to take no more than 'x' weeks (I think 12?) but came as a real shock when trying to make concrete offers and setting up expected exchange dates etc. The guy was very stressed about the whole experience. The EA's and solicitors were just as shocked, knowing nothing about the process, the guy being the first in the area to try and exit the HTB scheme (after ~2 years) well before the potential highlighted trap at the 5 year re-mortgage point. Add to that all the other buy/sell issues around credit checks and mortgage approvals, I can see this HTB becoming a major headache for many. Luckily the additional HTB valuation survey was sorted out before his mortgage offer expired and before any of the chain broke (during the BREXIT vote), where the paperwork is valid for 3 months before requiring some sort of refresh (another fee).

All from the memory of many heated tea break rants, so the details might not be completely accurate.

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