Govt to offer financial guarantees to banks to lend 95% mortgages and abandon post credit crunch regulation

[Frugal Git]

 

This is a big misunderstanding. Schemes like help to buy are buy now pay later government. We are kicking the can down the road with the government underwriting private sector risk or deferring liabilities. 

Don't worry, I understand it perfectly well. Doesn't change the reasons for minimizing my personal marginal tax rate.

[captainb]

It's an odd policy as soon as its in place its probably no longer needed. 

Commercially banks would offer 95% mortgages if they thought the outlook for housing was positive. A policy like this would push prices up 20% IMHO. 

 

Even if the borrower loses their job in Cv19 the asset maintains for their loan. 

 

[Clarky Cat]

This doesn't surprise me, but isn't it just a re-hashed idea - Help to Buy Mortgage Guarantee (stopped end 2016)

As usual it won't "help" anyone aside from the usual suspects, certainly not first time buyers.

Edited October 3, 2020 by Clarky Cat

[winkie]

 

Property is now the opium of the people. 

Property (paying for it) is what keeps people working.

[Si1]

 

This doesn't surprise me, but isn't it just a re-hashed idea - Help to Buy Mortgage Guarantee (stopped end 2016)

As usual it won't "help" anyone aside from the usual suspects, certainly not first time buyers.

https://www.moneysavingexpert.com/news/2016/09/government-to-scrap-help-to-buy-mortgage-guarantee-scheme/

 

[Fromage Frais]

 

The only people I know who are now jobless as a result of covid are those on minimum wage or just above who would of not been able to get a mortgage anyways, don't know of any one on a reasonable income being made redundant. They will still be able to buy, unless there is some sort of financial crisis like last time which will prevent them from buying and prices will have to come down naturally, but government will intervene as allways unfortunately. 

The are just the troops and the owners and managers will come later.

lots of pubs and hotels are in big trouble they sack the staff and then their reckoning will come once the creditors come in for them.

Then after that will come the professional services once their bills do not get paid etc etc.

 

 

 

[Gigantic Purple Slug]

Well people are going to have to live somewhere.

So if they aren't going to build cheap houses then they are going to have to make mortgages more affordable, so that people who would normally live in council houses can be housed.

So the question is, would you rather the government spend x billion on council housing, which is then sold off on the cheap to occupiers through right to buy, or would you rather the government spent money on propping up mortgages ?

[mattyboy1973]

Anyone still trying to value the housing market on "fundamentals" in this country is kidding themselves, IMO. This has been true for over 15 years. There is almost nothing the government can't, or won't, do to prop the housing market up and they have made this increasingly clear every time it has looked wobbly over the past decade. Not only will the measures themselves prop up the market (scrap MMR? back mortgages? bring back MIRAS? use your pension? the list goes on), but the very fact that the government are seen to back the housing market above all else will also instill more confidence. I wish it wasn't so, but that is the way it is. And the government is far from out of ammo yet.

[Gigantic Purple Slug]

 

Anyone still trying to value the housing market on "fundamentals" in this country is kidding themselves, IMO. This has been true for over 15 years. There is almost nothing the government can't, or won't, do to prop the housing market up and they have made this increasingly clear every time it has looked wobbly over the past decade. Not only will the measures themselves prop up the market (scrap MMR? back mortgages? bring back MIRAS? use your pension? the list goes on), but the very fact that the government are seen to back the housing market above all else will also instill more confidence. I wish it wasn't so, but that is the way it is. And the government is far from out of ammo yet.

If the government does not build social housing, it has to intervene in the private housing market almost by default in order to make it possible for people who could not normally use the private market to enter it.

 

[Fromage Frais]

I think I predicted a move like this in a post a few months back.

However I would have gone in 20 percent deposit and 4x earning so that a floor was put in rather than the government becoming the market which is what will happen in this scenario.

The stupid 5 percent down plan simply gives us a Fannie may situation where once the prices have risen and if the rates rise we will have a huge fall and requisite bailout.

I won’t be buying a 350000 family house for 600 plus I would rather expand my business and retire abroad after.

 

[mattyboy1973]

 

If the government does not build social housing, it has to intervene in the private housing market almost by default in order to make it possible for people who could not normally use the private market to enter it.

 

I don't disagree. We've got into a situation that has no good solutions now, although in large part we got into this situation in the first place because of a refusal to let house prices correct before they got quite so insane.

[simon2]

Social housing would only help the lower classes, as for the resale everyone else apart from them would turn up their noses at it.

And we all know that the government don't represent them.

Get yourself into the housebuilder shares first thing Monday, should be at least a +5% day for them as they have taken a kicking recently.

[wighty]

If more ftb homes are sold, won't this have the effect of reducing rents through fewer takers?.  Tough luck on BTLers.

Also it may make repossesions more likely as the loan is guaranteed by gov.

[Young Turk]

2 hours ago, Jimmyjammy001 said:

I would encourage anyone to buy before this goes live, this will be a bubble on steroids. 

A bubble is when prices are unsustainably higher than fundamental value. The government can pump prices higher, but if we are already in a bubble*, prices will fall below their current levels eventually. 

* We can't definitely say we are in a bubble. But if you think prices aren't currently above fundamental value, you should have been encouraging people to buy before this policy would discussed.

 

If instead you think these policies will be permanent and will lead to permanently higher prices, then that's not a bubble. That's a secular shift in demand. 

[Young Turk]

 

The only people I know who are now jobless as a result of covid are those on minimum wage or just above who would of not been able to get a mortgage anyways, don't know of any one on a reasonable income being made redundant. They will still be able to buy, unless there is some sort of financial crisis like last time which will prevent them from buying and prices will have to come down naturally, but government will intervene as allways unfortunately. 

Do any of them rent, or do they all live with their parents? If any of them rent, will they still be able to afford rent without a job? If not, what will happen to their landlords? Will they be able to find other tenants to pay the same rent, or will there be voids and lower rental income? If faced with lower rental income, will more landlords try to sell, and might that increased supply lead to downward pressure on prices?

[mattyboy1973]

 

If instead you think these policies will be permanent and will lead to permanently higher prices, then that's not a bubble. That's a secular shift in demand. 

Define "permanent". House prices have been detatched from their (traditional) fundamentals for over 15 years now. It's anyone's guess how much longer that can go on, or indeed if it goes on indefinitely. I've been on this forum on and off since 2007 and I can tell you there have been many, many conversations about the "certainty" that - this time - it really is going to happen.

[Trump Invective]

 

I think I predicted a move like this in a post a few months back.

However I would have gone in 20 percent deposit and 4x earning so that a floor was put in rather than the government becoming the market which is what will happen in this scenario.

The stupid 5 percent down plan simply gives us a Fannie may situation where once the prices have risen and if the rates rise we will have a huge fall and requisite bailout.

I won’t be buying a 350000 family house for 600 plus I would rather expand my business and retire abroad after.

 

Yes. They have to be careful not to overcook too early. Still 4 years from election too.

[Trump Invective]

https://www.business-live.co.uk/economic-development/sell-now-before-house-prices-19031551

'Sell now before house prices crash': Liverpool estate agent's urgent warning for those looking to move

 

Rather than "buy now before prices rise".

New EA mantra - and it simultaneously gives a nod to the govt (one of several lately) that it's time to start stoking the fire again.

[Si1]

 

Yes. They have to be careful not to overcook too early. Still 4 years from election too.

You sure about that?

[papag]

45 minutes ago, simon2 said:

Social housing would only help the lower classes, as for the resale everyone else apart from them would turn up their noses at it.

And we all know that the government don't represent them.

Get yourself into the housebuilder shares first thing Monday, should be at least a +5% day for them as they have taken a kicking recently.

Most have already gone up over last 2/3 days doubt any friends etc have been tipped off prior as this doesn't usually happen 😆

[btd1981]

 

I remember listening to the radio when Help to Buy was announced and thinking 'this wont push up house prices because they can't possibly go any higher.' How naive and wrong I was. This policy isnt in place yet, but I will be looking to buy before it goes live.

That pretty sums up my position at the time. I remember taking about it with my dad, bitching about what I had thought were already insanely high but then predicting that HTB would be inflationary and he said "why don't you just buy a place". Honestly I thought people would just reject higher prices. How wrong I was

I think part of the problem is that the HPCer goes "Jesus, house prices have increased by X% last year, that's insane and won't take much for that to come crashing down. And I'm not paying some numpty thousands for doing nothing" while average Joe thinks "cor, house prices have gone up by X% last year!1!!1 If I sell my kidneys to raise that 5% deposit I'm going to be rich when they do the same next year" 

[Young Turk]

 

Define "permanent". 

I suppose a policy can never really be considered permanent, as no government can tie the hands of all future governments - any policy could be reversed. 

I'd turn this around: Policies were introduced as temporary (notably HTB and low interest rates), but are beginning to look permanent, and current prices seem to rely on them being permanent. Every hint of rate rises or ending HTB and banks/builders shares fall and commentators complain. 

Will HTB be permanent? I doubt it.

Will rates never rise to very low levels (e.g. 2%), let alone lowish levels like 4-5%? Even if there is political will to maintain zero rates, this may not be sustainable.

 

 

House prices have been detatched from their (traditional) fundamentals for over 15 years now. It's anyone's guess how much longer that can go on, or indeed if it goes on indefinitely. I've been on this forum on and off since 2007 and I can tell you there have been many, many conversations about the "certainty" that - this time - it really is going to happen.

There are several factors which have been big contributors to the massive increase in UK house prices:

1) The UK is probably more prone to housing booms than other countries. People want to own their own homes here (renting is worse than in other countries) and want to speculate in property rather than shares (partly UK taxation incentivizes this, partly people are sceptical of shares). As a results myths grow: "You can't go wrong with property" "the government will never allow prices to fall" "they will never build enough to keep up with increasing demand" ...

2) Add to this the expansion of BTL in late 90s and it becomes a self-fulfilling prophecy. Homeowners and landlords are getting rich, convince themselves and others they are geniuses.

3) Interest rates cut to zero means increases the budget of FTBs and homeowners and increases the price landlords will pay. (Low IRs are a global phenomenon)

4) UK adopts specific additional measures to keep prices high.

 

What would it mean if prices continue to rise in real terms? Rental yields would remain very low or more likely fall. Why would people continue to buy if rental yields fall?

[dances with sheeple]

 

Anyone still trying to value the housing market on "fundamentals" in this country is kidding themselves, IMO. This has been true for over 15 years. There is almost nothing the government can't, or won't, do to prop the housing market up and they have made this increasingly clear every time it has looked wobbly over the past decade. Not only will the measures themselves prop up the market (scrap MMR? back mortgages? bring back MIRAS? use your pension? the list goes on), but the very fact that the government are seen to back the housing market above all else will also instill more confidence. I wish it wasn't so, but that is the way it is. And the government is far from out of ammo yet.

What do they do about commercial property if Covid persists?

[dances with sheeple]

 

That pretty sums up my position at the time. I remember taking about it with my dad, bitching about what I had thought were already insanely high but then predicting that HTB would be inflationary and he said "why don't you just buy a place". Honestly I thought people would just reject higher prices. How wrong I was

I think part of the problem is that the HPCer goes "Jesus, house prices have increased by X% last year, that's insane and won't take much for that to come crashing down. And I'm not paying some numpty thousands for doing nothing" while average Joe thinks "cor, house prices have gone up by X% last year!1!!1 If I sell my kidneys to raise that 5% deposit I'm going to be rich when they do the same next year" 

Transaction figures don`t agree with you, pre-Covid they were about half the peak for transactions.

[Social Justice League]

What we can take for this is that the Tories are the New Labour party.

Tony Blair will be their next leader at this rate.  (I bet you would get good odds on that one, just like betting in 2010 on Trump becoming President and Boris becoming Prime Minister)