Thursday, Sep 06, 2018

1980s style Shared equity all over again ?

Daily Mail: Help to Buy has left us trapped

A couple of weeks ago a colleague was discussing Help to Buy with me and I commented that it sounds to be no different from the Shared Equity schemes builders offered in the late 1980s, which ended up badly when prices stopped going up year after year.

Posted by tenyearstogetmymoneyback @ 09:02 PM (3850 views)
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8 Comments

1. Gjhodgson said...

There are several reasons not to use Help to Buy, however in this case it is not the fault of Help to Buy, it's actually cushioned their losses in a falling market!

Friday, September 7, 2018 08:20AM Report Comment
 

2. jack c said...

The problem with SAM's (Shared Appreciation Mortgages) was largely related to rising house prices ie people felt that the the lender received a disproportionate amount at the end of the deal facilitated by rising prices.

Aberdeen and the surrounding areas are very dependent upon the Oil & Gas sector (as the article states) and any prospective buyer should be aware of this albeit the vested interests are never going to point this out ! As a very general rule of thumb Brent Crude @ $100 barrel Aberdeen booming vs Brent Crude @ $20 barrel Aberdeen bust and house prices in the area reflect this.

Friday, September 7, 2018 10:47AM Report Comment
 

3. Nickb1 said...

Isn't the real problem that when you sell a HTB property, the potential buyers of the now second-hand property no longer have access to HTB funds and so the sale price falls by roughly the amount of the equity loan. This can partly explain the large average difference between sums shelled out on HTB properties and the rest - about £50k according to this source http://www.theweek.co.uk/house-prices/55455/help-to-buy-how-it-works-and-who-should-apply. Though some of this difference will be because of the higher value of a new home. Would be interesting to see stats of prices of comparable new and 2nd hand properties before and after HTB (rather, Help to Sell Wimpy Homes) was introduced.

Friday, September 7, 2018 11:29AM Report Comment
 

4. mombers said...

Yet another example of the damage tying up so much money in housing has. Impedes labour mobility, puts family formation on hold, all sorts of terrible stuff. We have the worst of both worlds in that the alternative is renting, which offers the worst value for money of any major economy. Also wrecks family formation as all your plans school wise etc can be torn up with 2 months' notice

Friday, September 7, 2018 01:52PM Report Comment
 

5. Bob said...

Assuming no movement in house prices, with a 75% mortgage and 20% HTB, you should have repaid down to about 86% LTV on a 30 year mortgage, leaving a realistic remortgage to a 25 year one.

If prices drop 15% in that 5 years you'll still be able to walk away with your original deposit

If prices drop 20% in that 5 years you'll be just in negative equity, at least for another year, but that would be a worse crash than 2007-2009 and no recovery

If you bought at the peak of the 2007 market and sold 5 years later, you would have a 10% drop

For a £200k house £10k deposit, your mortgage is £150k, and HTB is £40k. After 5 years price drops to £180k, your owe £130k mortgage and £36k HTB, leaving £14k equity.

And far more importantly, you've got stability and won't get kicked out on 2 months notice as the BTL owner of your rented house panics at dropping prices and decides to sell.

Monday, September 10, 2018 08:37PM Report Comment
 

6. nickb said...

When you sell a HTB the price falls because it is then not eligible for HTB credit from the govt. It's a second hand property. Astonishing the article does not mention this simple fact.

Tuesday, September 11, 2018 10:40AM Report Comment
 

7. Mr Messy said...

they wanted a house .........and brought a flat

Monday, September 17, 2018 05:33AM Report Comment
 

8. Beaker said...

So, they're still paying the parents back for their gifted deposit then? Anyone smell a little bit of fraud there?

In case anyone's wondering, a gifted deposit has to be exactly that. Usually requiring statement to be provided saying no repayment is due.

Tuesday, October 2, 2018 09:08PM Report Comment
 

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