Thursday, November 7, 2013

Toxic (no, not the Britney song)!

Lenders warn of Help to Buy mortgage 'addiction'

"The chairman of the Council of Mortgage Lenders has warned that the property market will need to be gently weaned off the Government's scheme "

Posted by alan @ 09:05 AM (1618 views)
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One thought on “Toxic (no, not the Britney song)!

  • If the take up of the scheme was big ie. the scheme is successful the you would need to take part in the scheme as anyone else interested in a property would outbid you using the scheme therefore you must join it if you want a house.
    I think addicted is the wrong term. It has parallels with the boom era where multiples were extended and LTV’s increased – once everyone in the market had borrowed the highest multiple and highest LTV price inflation stopped.
    I think the maximum inflation that this scheme can cause is around 10% if it has a good take up and will take around 12 months to price in. After that the inflation will stop unless either wages rise (unlikely), borrowing costs are further reduced or lending multiples increased.
    I am not sure increasing multiples is going to help much as people seem to be maxed out at current interest rates, so I would say that mortgage need to drop further to help the inflation up past the 10% mark.
    Around 7% of that 10% has been front run by the wider property market, so another 3% to go before we return to the monthly +/-0.5%.
    I am expecting them to drop stamp duty in the budget, that could give the market another few percent boost. The golden chalice would have to be reintroducing MIRAS for ‘hardworking families’ alongside BOE insured 30 year mortgages.

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