Whilst councils cut services for kids and oaps they will prop up housing market

poppysarah

This has to be the most bizarre thing ever.

http://www.thisismoney.co.uk/mortgages-and-homes/article.html?in_article_id=525716&in_page_id=8

It allows youngsters to put down a 5% deposit if their local authority agrees to put up to 20% in a Lloyds savings account as security on the property.
The buyer owns the house outright, while the local authority earns interest on its money.



The LA could be earning interest on it's money if banks weren't being so horrid to savers.
The UK needs to encourage people to save. This is yet another insane idea designed to prop up the housing market.

kingstreet

I was reading about this in Mortgage Strategy this morning.

http://www.mortgagestrategy.co.uk/1027774.article?cmpid=MSE01&cmptype=newsletter&email=true

I'm not sure how I feel about it, at the moment.

Local, fire and police authorities are sitting on reserves of over £10 billion, which I assume attract interest, although perhaps not as much as when Icelandic banks were involved. If they use this scheme, Lloyds will pay them interest on the money, while it frees up funds which the bank can lend to others.

If it is centred on affordable housing, at a time when the HomeBuy schemes are likely to face cuts, it might be a chance to start to address the issue of how we get the extra 750,000 homes we'll need in the next fifteen years.

The problem of course is default and repossession and what happens to the cash under those circumstances...?

I'll reserve judgment for now - but I'm lukewarm on the idea, rather than cold.

poppysarah

kingstreet wrote: »

If it is centred on affordable housing.

Clearly not.

Affordable should be affordable without having to borrow 20% off your council/parents/etc.

The longer it goes on the worse it gets.

Bubbles pop sooner or later...

Running_Horse

I posted this story in the house price forum last night.

https://forums.moneysavingexpert.com/discussion/3114048=

My thread title is more even handed.

poppysarah

Running_Horse wrote: »

My thread title is more even handed.

Not on a money saving forum.

FTB will pay more if house prices don't drop.

mr_fishbulb

I don't get this. When you pay a deposit on a house (i.e. the cost of the house not covered by the mortgage) it doesn't just sit in a bank account - it is given to the vendor so they can then buy their new house.

If I'm selling my house, I don't want to be told "Here's 80% of the money. You can't have the rest because it's actually the council's".

kingstreet

mr_fishbulb wrote: »

I don't get this. When you pay a deposit on a house (i.e. the cost of the house not covered by the mortgage) it doesn't just sit in a bank account - it is given to the vendor so they can then buy their new house.

If I'm selling my house, I don't want to be told "Here's 80% of the money. You can't have the rest because it's actually the council's".

Lloyds are lending 95% and the buyer puts down 5%, so the vendor gets the full purchase price. The 20% deposited in an account is like an indemnity policy for the lender.

mr_fishbulb

kingstreet wrote: »

Lloyds are lending 95% and the buyer puts down 5%, so the vendor gets the full purchase price. The 20% deposited in an account is like an indemnity policy for the lender.

Thanks. Although doesn't an indemnity policy mean it's there to pay for any loss suffered by the vendor? Therefore the council is putting it's money at risk?

(Edited because I've confused myself posting on 2 separate topics about this.)

Neil_in_Bristol

kingstreet wrote: »

Lloyds are lending 95% and the buyer puts down 5%, so the vendor gets the full purchase price. The 20% deposited in an account is like an indemnity policy for the lender.

So the council is responsible for the risky bit of the loan that the mortgage lenders aren't currently prepared to lend? Great...