Why Are The Goverment Telling People To Buy When They Know1

jamesd wrote: »

Clearly the government is not on the side of those who want to buy their first home. In spite of that briefing document's hypocritical comment that "it's vital that we show at this time of uncertainty we show that we are on people's side". I suppose we can expect more bogus claims to be on our side while supporting high property prices.

Let's do some numbers. Assume a family is buying a house worth £200K, with a 25% or £50K deposit. Assume that buying the house costs £5K all up in non-refundable expenses, taxes, and fees. So, the family has put £55K of their own money into the house. And they have a 180K mortgage on it.

Then the value of the home drops 10% in one year. It's now worth £180K, and has a £140K mortgage on it. They then have £40K of equity, and have lost £10K of their deposit, plus the extra £5K of fees. They've avoided paying £8K of rent, but have paid £9K in interest, and hence are out £16K.

But the bank has a £140K mortgage secured against a £180K home. So the bank is all right then isn't it. This relatively secure loan then has increased the average quality of loans on the bank's books, helping to compensate for previous unwise lending.

So how could the government recommend that people buy houses? Why, could it be to help out their friends the banks?

jamesd wrote: »

The Housing Minister clarified whose side she was on in a later statement reported in The Telegraph: "This Government is on the side of homeowners" while also noting that prices are "45.5 per cent higher than five years ago". Getting rid of that 45.5% increase seems like something that will help first time buyers and those with growing families.

Couldnt have put it better myself.

The average house should be roughly 30% lower than what they are going for now at this present time.

pinkshoes wrote: »

How can you put a price on the non-physical aspects (security etc...) of owning your own home?

So long as you can afford the payments, and are planning to stay there for long time, then who gives a monkeys if it drops in price??

If I'd stayed in my last rented place, I would have been forced to move as the owner moved abroad and sold up, plus after 10 years renting, I hated it with a passion. I'd rather risk losing 20% of the "value" of my home than have stayed in rented accomodation.

It's nice being able to stick a picture hook in the wall without having a landlord charging me £50 from my deposit to have it filled in and the wall repainted.

Because the bank don't care what price you put on that. They care what price you paid, how much you owe and what it's worth now.

Your home is worth whatever people are willing to pay you for it. No more - no less.

We still have to factor in the shortage of housing and the growing population along with the fact that the housing developers don't want to build any more houses in the current market.

We are certainly in for a rocky ride but I don't believe we are going to have a 30% drop in value, but if we do then I think prices will regain the ground they lost fairly quickly when the crunch is over.

However I am no expert and given the experts don't have a clue then what chance have I got! :rotfl:

pinkshoes wrote: »

So long as you can afford the payments, and are planning to stay there for long time, then who gives a monkeys if it drops in price??

But the governments proposal for helping first time buyers is shared equity. The FTBer pays for only 80% of the property and the government pays 20%. The FTBer pays the government back at a later date when they can afford it.

That's hardly what I call being able to "afford the payments" of a mortgage when you can only afford to buy 80% of the property in the first place.

What the government is encouraging FTBers to do is utterly shameful.