Price falls - bad news for Help To Buy equity loans

[Mapatasy]

https://www.which.co.uk/news/2018/05/slowing-house-prices-spell-bad-news-for-help-to-buy-equity-loans/

A plug for Which? Mortgage Advisers... but interesting none the less.

[Barnsey]

21 minutes ago, Mapatasy said:

https://www.which.co.uk/news/2018/05/slowing-house-prices-spell-bad-news-for-help-to-buy-equity-loans/

A plug for Which? Mortgage Advisers... but interesting none the less.

Really interesting article thanks for posting, helpful to see past 5 year HPI by local authority, some staggering %'s.

Interest on the equity loan increases each year, so you could end up adding hundreds to your bill over time. For that reason, many homeowners opt to remortgage their property, pay off the equity loan and continue paying mortgage interest at the new rate. In fact, most banks require you to pay off the equity loan in order to remortgage. But this is usually only possible if your property has grown significantly in value, meaning slow price growth could be a stumbling block.

No mention of these properties being overvalued in the first place, essentially in negative equity before any sizeable falls!

Edited May 17, 2018 by Barnsey

[Mapatasy]

6 minutes ago, Barnsey said:

Really interesting article thanks for posting, helpful to see past 5 year HPI by local authority, some staggering %'s.

Interest on the equity loan increases each year, so you could end up adding hundreds to your bill over time. For that reason, many homeowners opt to remortgage their property, pay off the equity loan and continue paying mortgage interest at the new rate. In fact, most banks require you to pay off the equity loan in order to remortgage. But this is usually only possible if your property has grown significantly in value, meaning slow price growth could be a stumbling block.

Yes... I'd never considered the re-mortgage implications.

So as prices fall potentially those who have used the 'scheme' could find themselves unable to re-mortgage and at the mercy of SVR?

Just as rates start to rise. Not pretty.

[sideysid]

I have no doubt that in the next few years (especially if the housing market downturn gathers pace - and it will) we will see a U-turn by the government for debt forgiveness on the HTB loans.

The sentiment is changing and government know leading into the next GE they will start to need the millennial votes, many who will be on the HTB scheme. Imagine the outcry should interest rates be forced up ‘a la’ DBs thread.

[Mapatasy]

2 minutes ago, sideysid said:

I have no doubt that in the next few years (especially if the housing market downturn gathers pace - and it will) we will see a U-turn by the government for debt forgiveness on the HTB loans.

The sentiment is changing and government know leading into the next GE they will start to need the millennial votes, many who will be on the HTB scheme. Imagine the outcry should interest rates be forced up ‘a la’ DBs thread.

In total agreement with you.

I know an individual with an interest only mortgage who has just come into a reasonably large inheritance. She's aware of all the 'ticking time bomb stories' so is not going to do anything with the money except keep it in the bank and wait things out until Gov show their hand.

Quite smart.

[ingermany]

Not exactly bad news for borrowers. I tried to find a surveyor last month and they were all too busy to take the job because they were doing so many HTB valuations. They openly boast that the HTB valuation is completely different from a mortgage valuation.  They explain how a low HTB valuation may help get the equity loan reduced drastically, and be accompanied by a separate, much higher valuation which is used to secure a bigger, cheaper mortgage.  Lots of delighted customer feedback on the HTB loan redemption issue. 

 This might explain why, in a stagnant housing market, surveyors are working 24/7 and are too busy to do ordinary structural surveys. 

[dougless]

On the basis that my enemy's, enemy is my friend, I see  this as good news.  Anything that undermines confidence in property values is very good news.

[Funn3r]

16 minutes ago, ingermany said:

 a low HTB valuation may help get the equity loan reduced drastically, and be accompanied by a separate, much higher valuation which is used to secure a bigger, cheaper mortgage.  

How is that even legal! How does the guy do a low valuation then next day wearing a different hat it's a higher valuation. "It's gone up a lot since yesterday" 

[stop_the_craziness]

8 minutes ago, Funn3r said:

How is that even legal! How does the guy do a low valuation then next day wearing a different hat it's a higher valuation. "It's gone up a lot since yesterday" 

Nothing about HTB should be legal.  The whole massive Ponzi absolutely stinks of corruption and cronyism

[The Spaniard]

1 hour ago, Mapatasy said:

I know an individual with an interest only mortgage who has just come into a reasonably large inheritance. She's aware of all the 'ticking time bomb stories' so is not going to do anything with the money except keep it in the bank and wait things out until Gov show their hand.

Maybe in several banks to keep each account below £85,000. (NS&I excepted)

[Si1]

1 hour ago, Funn3r said:

How is that even legal! How does the guy do a low valuation then next day wearing a different hat it's a higher valuation. "It's gone up a lot since yesterday" 

https://www.theguardian.com/money/2018/apr/25/help-to-buy-agency-writes-down-loan-on-flat-over-grenfell-style-cladding

 

[hurlerontheditch]

Quote

Initially, it claimed the flat is now worth just £278,000 — £12,000 less than the value it gave it two-and-a-half years ago.


 

 

 

http://www.thisismoney.co.uk/money/mortgageshome/article-5733321/Beware-red-danger-signs-house-prices-Young-buyers-borrow-record-sums.html

[Si1]

6 minutes ago, hurlerontheditch said:

 

 

http://www.thisismoney.co.uk/money/mortgageshome/article-5733321/Beware-red-danger-signs-house-prices-Young-buyers-borrow-record-sums.html

the guys quibbling about £200 per year on his 300k flat. wtf.

[hurlerontheditch]

16 minutes ago, Si1 said:

the guys quibbling about £200 per year on his 300k flat. wtf.

you should only ever make more and more money from housing

[Barnsey]

1 hour ago, hurlerontheditch said:

http://www.thisismoney.co.uk/money/mortgageshome/article-5733321/Beware-red-danger-signs-house-prices-Young-buyers-borrow-record-sums.html

Experts say Lee is not alone. One of Britain's biggest mortgage brokers, John Charcol, has seen the number of so-called down valuations — where a lender values a property at less than a buyer believes it is worth — double over the past year.

Nick Morrey, product technical manager at the firm, says that staff are dealing with 20 to 30 cases of down valuations each month, with lenders stating that houses are worth up to £100,000 less than their owners believed.

And so it begins...

[Wayward]

5 hours ago, sideysid said:

I have no doubt that in the next few years (especially if the housing market downturn gathers pace - and it will) we will see a U-turn by the government for debt forgiveness on the HTB loans.

The sentiment is changing and government know leading into the next GE they will start to need the millennial votes, many who will be on the HTB scheme. Imagine the outcry should interest rates be forced up ‘a la’ DBs thread.

I have said from the outset that such a blatantly cynical scheme to distort the market can only end in tears with the laws of unintended consequences applying in many ways given such so contrived, artificial and complex.  We will be hearing more and more about HTB over the coming years I predict as this unravels and it will come back to haunt the Torys...Osbourne will become infamous for this.

[dougless]

2 hours ago, Wayward said:

We will be hearing more and more about HTB over the coming years I predict as this unravels and it will come back to haunt the Torys...Osbourne will become infamous for this.

I do hope so.

[ingermany]

7 hours ago, Funn3r said:

How is that even legal! How does the guy do a low valuation then next day wearing a different hat it's a higher valuation. "It's gone up a lot since yesterday" 

https://www.rjharmer.co.uk/rics-help-buy-surveyor/

 

Explains that HTB valuation is done to a different set of criteria than remortgage valuations or estate agent valuations. The flat in London valued at 50k recently, to effectively write off a massive HTB loan is the extreme, but it is quite possible to get a low valuation, reduce the HTB loan redemption cost and then finance that with a remortgage based on a much higher valuation for the same property.  Of course the whole concept of the scheme is corrupt. CEO of Persimmon pocketed 110 million annual bonus paid for by taxpayers. 

[oatbake]

4 hours ago, Barnsey said:

Experts say Lee is not alone. One of Britain's biggest mortgage brokers, John Charcol, has seen the number of so-called down valuations — where a lender values a property at less than a buyer believes it is worth — double over the past year.

Nick Morrey, product technical manager at the firm, says that staff are dealing with 20 to 30 cases of down valuations each month, with lenders stating that houses are worth up to £100,000 less than their owners believed.

And so it begins...

Yes this was *exactly* how it started in 2007/2008 if I remember correctly. Everything was fine until house prices started to turn due to rising interest rates (remember those?).

At the end of the day idiots will borrow as much as they are able to too buy a house. They were able to do this only because valuations sorted the mortgages they were trying to take out.