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https://www.thetimes.co.uk/article/help-to-buy-mortgage-repayment-trap-lbtm60msv

"The plight of borrowers who have snapped up homes under the Help to Buy scheme serves as a warning of the problems caused by government intervention in the housing market.

 

This week Boris Johnson pledged to help two million people on to the property ladder by “turning Generation Rent in to Generation Buy”...."

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https://www.thetimes.co.uk/article/help-to-buy-mortgage-repayment-trap-lbtm60msv

"The plight of borrowers who have snapped up homes under the Help to Buy scheme serves as a warning of the problems caused by government intervention in the housing market.

 

This week Boris Johnson pledged to help two million people on to the property ladder by “turning Generation Rent in to Generation Buy”...."

Who could have foreseen this? <_<

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Who could have foreseen this? <_<

It reminds me of what the head of the buildings society association said after the credit crunch "nobody could have seen this coming" (after taking the bailout of course)

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It reminds me of what the head of the buildings society association said after the credit crunch "nobody could have seen this coming" (after taking the bailout of course)

Oh et me have a go

All demuting in the mid 90s.

Moving from raising capital via cash deposits and binds to (cheaper) wholesale funding.

Massively expanding assets(lending).

Moving from lending to residential mortgages with high deposits and low LTV, to lending IO BTL - commercial.

Putting lessn less captial aside for each house.

Then the wholesale funding markets freez/retreat, house prices fall and boom - 150+ of mutual building societies all blow up within 10 years of demute.

Yep. Totally out of the blue 1 in 1,000,000 year event ...

 

 

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https://www.thetimes.co.uk/article/help-to-buy-mortgage-repayment-trap-lbtm60msv

"The plight of borrowers who have snapped up homes under the Help to Buy scheme serves as a warning of the problems caused by government intervention in the housing market.

 

This week Boris Johnson pledged to help two million people on to the property ladder by “turning Generation Rent in to Generation Buy”...."

It's alright - they can just take out a 95% "Generation Buy" mortgage once they're available

(only slightly tongue in cheek)

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It's alright - they can just take out a 95% "Generation Buy" mortgage once they're available

(only slightly tongue in cheek)

Omg that couldn't be the plan... Could it?

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(from 2016)

https://www.ft.com/content/0989bc0c-d0b0-11e5-831d-09f7778e7377

That’s interest free for five years, after which buyers will be charged 1.75 per cent interest (rising in line with inflation). So the annual interest on the government slice (not including any capital repayment) will cost an additional £2,000 a year (£166 a month) on top of the mortgage and rising. That’s a lot of debt to deal with.

The government loan is immediately repayable if the property is sold. What’s more, it is entitled to 40 per cent of the sale price, plus interest and charges. To have any hope of trading up, buyers had better hope that property prices keep on rising (not to mention their salaries). And how can we guarantee that happening? Well my young friend, have you heard of this neat little policy called Help to Buy?

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People on help to buy instinctively feel the help to buy loan is a non recourse final tranche. It isn't of course, it's a straight percentage. 

Eg. If prices dropped 30% and they sell, they think the mortgage company gets all its money back, and help to buy just gets 10% instead of 40%. 

( in fact of course, they're underwater for the help to buy repayment ie28%)

So we can expect a government scheme in future called Help to Sell, which will lend them the 28% shortfall unsecured (so they can sell it and pay the mortgage company in full). 

Can't really ask the mortgage company to share a loss on their own foolish lending...

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People on help to buy instinctively feel the help to buy loan is a non recourse final tranche. It isn't of course, it's a straight percentage. 

Eg. If prices dropped 30% and they sell, they think the mortgage company gets all its money back, and help to buy just gets 10% instead of 40%. 

( in fact of course, they're underwater for the help to buy repayment ie28%)

 

I'm not even sure it's that easy. You have to jump through legal hoops to get the help to buy loan company (or whoever it is) to accept the lower valuation, as far as I know. By and large they won't, I believe but could be corrected. (Exception being for Grenfell cladding devaluation)

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  • 429 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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