Debate House Prices


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Public money used to provide mortgages.

http://www.channel4.com/news/newcastle-council-to-offer-95-per-cent-mortgages

Newscastle City Council have decided to offer 95% mortgages, all publically funded, in order to sell flats.

The council will ultimately decide who they lend to.

They are seen as too risky to loan on by banks and mortgage providers.

Part of the problem with these flats, is the area. It was shown on Channel 4, and wasn't the nicest of areas. The housing manager describes it as:
"This area is great to live in. Just down there are all the shops and the university. There are already lots of young professionals living in this area and maybe they will want to buy a flat in this brand new development."

Channel 4 describes it as:
A short walk from the neat landscaping of the flats and you enter a whole different world. A 1980s shopping centre with graffiti and peeling pain, dark alleys and concrete underpasses.

The council can't reduce the prices, as they have spent too much already on these and need to get it back. Was spent just before the crash.

So, should public money be used in this way, to provide 95% mortgages?

Is this the first step towards public funded mortgages, taking on risks the banks won't take on?
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Comments

  • halight
    halight Posts: 3,629 Forumite
    Part of the Furniture Combo Breaker
    I dont see it wrong for Councils to give people mortgages if there is a good chance that they will get all there money back and make some on top.
    However if they are just going to chuck good money after bad then no i dont think thats a good idea.
    :jYou can have everything you wont in lfe, If you only help enough other people to get what they wont.:j
  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Won't the council be borrowing the money though?

    They borrowed to build .... now they'll borrow a wholesale bucket of mortgage money to lend to individuals who wouldn't get a mortgage as they're a higher risk than the council. So, theoretically, the mortgages being paid will pay the Council mortgage loan off .... and the wholesale mortgage loan will pay off their original development debt.
  • Graham_Devon
    Graham_Devon Posts: 58,560 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    edited 7 November 2010 at 7:46PM
    Won't the council be borrowing the money though?

    They borrowed to build .... now they'll borrow a wholesale bucket of mortgage money to lend to individuals who wouldn't get a mortgage as they're a higher risk than the council. So, theoretically, the mortgages being paid will pay the Council mortgage loan off .... and the wholesale mortgage loan will pay off their original development debt.

    It sounds very much like that, yes.

    Meanwhile, the buyer has landed themselves in negative equity from the outset, with the possibility of selling and moving drastically harder due to the desperate way in which these are being sold in the first place.

    The above is my problem with all this. You can't stop a buyer from being stupid, and not simply looking past this, but councils really shouldn't be allowed to do this in my mind.

    Council bypasses the valuation from the surveyor, which would inevitably render the property unmortgageable for buyers. Theres no other reason ALL of these flats cannot be shifted, other than the mortgage valuers won't balue the properties the same as the council do, and I think personally, this is the biggest issue here. If they were priced right, they would sell.

    Also, from the outset, the public purse is the guarantor.

    Seems wrong on quite a few levels to me, but can see why the council are desperate to get the money for them. Just hope no ones stupid enough to buy.
  • amcluesent
    amcluesent Posts: 9,425 Forumite
    Interesting inversion. The council is providing mortgages to owners while private investment is going into build-to-let focussing on peeps claiming LHA.
  • If it helps cash strapped FTB get that first crucial step onto the ladder then I don't see why you ghouls should have issue with it.
  • If it helps cash strapped FTB get that first crucial step onto the ladder then I don't see why you ghouls should have issue with it.


    could you expand on the crucial step? i dont see owning a house [thats wishfull thinking] as crucial for day to day living

    but good for you it sounds like you are willing to fund those poor single ftb (previous thread you forgot to answer), if all these people are cash strapped as you say then the problem is not who lends money but prices in general?
  • PasturesNew
    PasturesNew Posts: 70,698 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic

    ...You can't stop a buyer from being stupid...
    So true.
    :)
  • Guitar
    Guitar Posts: 157 Forumite
    Part of the Furniture 100 Posts Combo Breaker
    I'm one of the young(ish) professionals that this is targetted at. I've worked in Newcastle 7 years and know well enough to stay far away from that area. This region has had plenty of these tower block developments that start off as 'executive' builds, loose value fast and end up cess pools. They then get demolished or refurbished and the cycle starts again. Pity neither the video or the webpage mentions prices so I can't compare them to the alternatives in the region.

    The girl in the video talks about getting onto the property ladder but doesn't seem to realise that if she bought into that block of flats she'd find it difficult to find anyone who'd want to buy from her. Similar flats nearby in Gateshead are due to be demolished because nobody wants them. Last stats I saw, 18% percent we empty so they become dumping grounds for social housing tenants. Suddenly they're not so popular with the 'young professionals'

    Googlemaps still has what Cruddas Park used to look like here

    If the council are desperate to get rid of these flats, who's gonna pay to make sure they don't end up like that again?
  • could you expand on the crucial step? i dont see owning a house [thats wishfull thinking] as crucial for day to day living

    but good for you it sounds like you are willing to fund those poor single ftb (previous thread you forgot to answer), if all these people are cash strapped as you say then the problem is not who lends money but prices in general?


    Yes considering food and shelter are 2 of the most basic tenets for human survival I see what you mean, not crucial in the slightest.

    And there is nothing wrong with house prices. If you think they are then go shared ownership or get a better paid job.
  • I know this area and it's not pleasant to be honest.
    It's fine buying one of these flats if that's the only way you can get a mortgage to get on the housing ladder but I'd seriously worry if I wanted to sell it later as I don't think they'd be very easy to re-sell.
    No doubt Newcastle Council will get some mugs who'll want to buy them and no doubt in a few years time they'll be in the Evening Chronicle moaning how they're stuck with them.
    Personally I'd be telling people to steer clear.
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