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5% Mortgage Guarantee Confirmed


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29 minutes ago, Trump Invective said:

This won't change anything. We knew it was coming, to avoid the cliff edge, but we are talking minimal effect these days, the market is already pumped to the max. Deposit, sure, what about the wages needed to get the mortgage?

That was my thought about sitting tight after Help to Buy was announced. Massive miscalculation on my part. Wailing from younger colleagues has long been that they could afford monthly mortgage payments if only they could get a decent deposit together. A wave of FTBs are about to be unleashed, without any corresponding increase in supply of housing. Prices will rise significantly within months. 

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2 minutes ago, Odysseus said:

Is this Help to Buy but now also available on pre-existing homes? If so I expect the market to get turbo charged, my experience of young people is they will do anything to “get on the ladder”. 

They already had the same thing, on 2nd hand homes, until 2016.

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2 minutes ago, rantnrave said:

'The new scheme is not restricted to first-time buyers'

So open to BTL?

I doubt it. Being open to 2nd time buyers is bad enough.

Having said that, this is another sign of govt panic.

Edited by Si1
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If this happens as advertised, then it will be another dreadful abuse of power by this current Big Government nightmare. 
 

in effect it will mean that my (tax) money is being spent by the government against my will on something that is directly opposed to my best  interests and those of my family and friends. 
 

it should be illegal in any sane society. 

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8 minutes ago, rantnrave said:

That was my thought about sitting tight after Help to Buy was announced. Massive miscalculation on my part. Wailing from younger colleagues has long been that they could afford monthly mortgage payments if only they could get a decent deposit together. A wave of FTBs are about to be unleashed, without any corresponding increase in supply of housing. Prices will rise significantly within months. 

Let them fight it out. I'm chill

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Just now, 24gray24 said:

Can someone explain the scheme? (Or the old one, as it seems similar)?

Govt will cover the first 15% of negative equity loss to the lender. The lender has to pay some kind of up front insurance cost for each mortgage to be part of the scheme. That's how the old HTB mortgage guarantee worked anyway.

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2 hours ago, 24gray24 said:

I don't get how this works. 

Government guarantees 5% of mortgage will be paid and lends 5%? 

Won't that just push up prices 5%?

Lets have a lookie...

https://www.bbc.co.uk/news/uk-56218952

The coronavirus pandemic has meant there are few low-deposit mortgages available, the Treasury said, with just eight on the market in January.

No, thats 2008 and the banks failing.

Low-deposit mortgages are often seen as riskier by banks as they are more vulnerable to negative changes in property prices - meaning people hold more debt than their home is worth.

Seen??? They are FFS.

Under the new scheme, which will launch across the UK in April, the government will offer to take on some of this risk.

It is not restricted to first-time buyers or new-build homes, but there will be a £600,000 limit.

Lenders will be given the option to purchase a government guarantee that will compensate them for a portion of their losses in the event a buyer cannot keep up with mortgage payments, the Treasury said.

Thats kind.

Its a bit detail lite. 'Some risk' 'purchase' Numbers are everything in finance. Theres none here.

If I was to guess, Id guess this is bone thrown from the Treasury, who hated HTB, as a 'support for generation rent'

You dont want a 95% mortgage. In fact, you really dont want a mortgage more than 80%  Neiher do the banks who price accordingly.

Mortgages with fixed rates for at least five years will also be offered.

People should fix long n low.

Ive a 5 years mortgage @ ~1.8%. Its great.

Not sure how UK can do this. esp. after the last week where bond markets are eventaully moving after a long 16 years asleep/beaten down by CBs.

It all reads motherhood n apple pie.

Im not sure how UKGOV, with a ~100% GDP debt can offer anything approaching stabiliy.

If you want low rates to run something close to Fannie Mae then you need a large, liquid debt market liek the US., funded by $ being the world currency.

Or you follow the Swiss and run a v tight ship.

UK is neither.

UK< like other West European countries debt dynamics are approaching developing country levels.. These dont come with low low rates. Turkeys IR are 17%. Argentina's is 38%

 

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5 minutes ago, Odysseus said:

Is this Help to Buy but now also available on pre-existing homes? If so I expect the market to get turbo charged, my experience of young people is they will do anything to “get on the ladder”. 

As other people have also pointed out, it's a guarantee scheme rather than the 20% HTB loan and it did exist before. I can't remember it being particularly popular the last time around, but the introduction of the two HTB schemes did lead to a few years of price increases when they'd been stagnant before.

I do wonder whether the HTB new build scheme was more popular as people could borrow more money and hence get a "more valuable" house. For a couple with combined income £60k going for 4.5x joint:

HTB loan: Mortgage £270k, HTB loan £72k, deposit £18k = £360k

HTB mortgage guarantee: Mortgage £270k, deposit £14k = £284k

 

 

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4 minutes ago, Clarky Cat said:

As other people have also pointed out, it's a guarantee scheme rather than the 20% HTB loan and it did exist before. I can't remember it being particularly popular the last time around, but the introduction of the two HTB schemes did lead to a few years of price increases when they'd been stagnant before.

I do wonder whether the HTB new build scheme was more popular as people could borrow more money and hence get a "more valuable" house. For a couple with combined income £60k going for 4.5x joint:

HTB loan: Mortgage £270k, HTB loan £72k, deposit £18k = £360k

HTB mortgage guarantee: Mortgage £270k, deposit £14k = £284k

 

 

I'm a little more sanguine about this now. It's as if the govt have been trying to come up with something and this is an they could manage.

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3 minutes ago, Postman said:

So the government plans to use our tax £s to underpin risky lending, for what? To make unaffordable homes more unaffordable? 

These people are evil. 

I'm not left wing or a traditional Labour voter. But the current govt seem to be at the end of their reign, cynical and desperate. It is evil indeed. I'll vote labour to get these devils out, providing Labour appear half competent, which they do.

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Replying to @spyguy

"Its a bit detail lite. 'Some risk' 'purchase' Numbers are everything in finance. Theres none here."

Agreed. How much will the gov guarantee cost the banks, etc? What will the banks' appetite to lend on this basis be?

It's a bad idea but how bad, we can't propery know yet. The devil is in the detail.

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Generally people need a job to repay a mortgage, a full time job for a long period of time........monthly debt repayment runs alongside a monthly income that can support it, and everything else.......a 5% deposit is not what prevents a purchase.;)

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1 minute ago, Si1 said:

Govt will cover the first 15% of negative equity loss to the lender. The lender has to pay some kind of up front insurance cost for each mortgage to be part of the scheme. That's how the old HTB mortgage guarantee worked anyway.

So... is that the one where government takes a 15% interest in the property?

If property goes up, government gets its money back when you remortgage. 

If prices go down, taxpayers take the loss. 

Is it that one? 

Wasn't much uptake last time? Can't remember why. 

 

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