Government FirstBuy Scheme - what where and how!

leon501

I agree with the people asking for more advice and not just negative comments

I for one am very intersted in this scheme, I have saved up around 7k towards a deposit on a house but it could take me up to 2 more years to save up the rest for a 20 percent deposit on a house

I have a good job and am reasonably well paid as well, alli want to do is by a normal house that i can raise a family in with my wife, not buy a mansion or anything i will struggle to pay off.

Currently i pay around 600 pounds a month in rent so if i were to get on this scheme then i could put that into paying off a mortgage, over the next two years that would be over 12k paid off my mortgage or at least the interest.

Maybe this deal does have some flaws such as having to buy a new build but whats the alternative, you all keep harping on about house prices coming down but the trouble their is two things, 1 people can't afford to sell them for less than what they bought them for as they all went mad and bought houses they could never afford and 2 the goverment has made it so banks will not reposess these houses so even when mortgages do start to move again these houses will continue to just go up and up

If people do have any help then please just post it maybe some of us have looked into this deal and will continue to look into it because it is best for us!!!

Qualcuno

Most shared equity schemes are virtually a scam. Not all are though, especially government sponsored ones. Those of us considering this need better information about this specific scheme, not generalisations about other schemes.

I do understand what's been said about a fall in house prices being better for us FTBs. But don't you think we can take this scheme as a statement of intention that the Tories will do everything to prevent that? If this scheme doesn't work, won't they just come up with a bigger more expensive scheme to prop up house prices?

leveller2911

Qualcuno wrote: »

Most shared equity schemes are virtually a scam. Not all are though, especially government sponsored ones. Those of us considering this need better information about this specific scheme, not generalisations about other schemes.

I do understand what's been said about a fall in house prices being better for us FTBs. But don't you think we can take this scheme as a statement of intention that the Tories will do everything to prevent that? If this scheme doesn't work, won't they just come up with a bigger more expensive scheme to prop up house prices?

I believe the Government are fully aware of the problem but are trying to slow the fall so it has less effect on the rest of the economy.Think about it HPI has increased something like 200% in the last 10 years but has earnings increased in comparison? answer is no, probably no more than around 30% max.The sums just don't add up and the key is affordability , 3.5 or 4 x earnings has worked for decades, nothing has changed apart from people tend to have far more unsecured credit.

These schemes are a just postponing the problem and not solving it.When you borrow the rest of the deposit for a house via the scheme it still has to be paid back and you would more than likely find yourselves in negative equity for years to come.

What happends when/if when the time comes to repay the loan and you also find that few if any mortgage lenders won't entertain you because you have little or no equity?....

The days of buying cheap and relying on HPI to make you rich are over and the only way is to knuckle down and save.


Its true to say we don't know the details yet of the scheme but is anyone seriously suggesting it will have any real effect on the Housing Market?

Trifid

leveller2911 wrote: »

Think about it HPI has increased something like 200% in the last 10 years but has earnings increased in comparison? answer is no, probably no more than around 30% max.The sums just don't add up and the key is affordability , 3.5 or 4 x earnings has worked for decades, nothing has changed apart from people tend to have far more unsecured credit.

But interest rates have come down a lot since then (ignoring the last couple of years when they are at an all time low). To look at affordability you need to look at a % of your after tax income spent on the mortgage.

leveller2911

Trifid wrote: »

But interest rates have come down a lot since then (ignoring the last couple of years when they are at an all time low). To look at affordability you need to look at a % of your after tax income spent on the mortgage.

Fair point but interest rates will rise soon and base rates of between 4-6% were the norn so given that fact how many people are struggling with repayments now with bank base rates of 0.5%?.

What will happen when rates rise? 125% mortgages are gone and 100% should never return IMO but thats what it is my opinion.

People should save for a decent deposit and when they have they may just be a bit more interested in making sure the mortgage is affordable.
We have had far to much of this "I want it now syndrome"

Qualcuno

leveller2911 wrote: »

I believe the Government are fully aware of the problem but are trying to slow the fall so it has less effect on the rest of the economy.Think about it HPI has increased something like 200% in the last 10 years but has earnings increased in comparison? answer is no, probably no more than around 30% max.The sums just don't add up and the key is affordability , 3.5 or 4 x earnings has worked for decades, nothing has changed apart from people tend to have far more unsecured credit.

From Jan 01 - Jan 11, Land Registry price index increased by 87%, ONS Average Weekly Earnings increased by 38%. So you've exaggerated a bit(!), but I get your point.

brit1234

Trifid wrote: »

So we are all saying this is a bad deal?

Alternatively I am saving up at a very healthy rate while I am living with my parents.

Thanks.

Yes. :beer:

Keep saving at your parents home for another year. House prices are falling whilst your deposit gets bigger. Meanwhile people on this scam scheme go into negative equity.

Muhasib

brit1234 wrote: »

Yes. :beer:

Keep saving at your parents home for another year. House prices are falling whilst your deposit gets bigger. Meanwhile people on this scam scheme go into negative equity.

How can it be a scam scheme if there are no details published yet?

Shinkansen

I'd like to give some actual information as someone who spent months researching shared-equity schemes and is currently going through the motions as a key-worker. This is applicable to part-buy/part-rent schemes and NOT the equity-loan scheme.

First off, I would like to point out that under Government-backed (key difference) shared-equity schemes, if your property loses value, then the loss incurred is shared between yourself and the developer. If you purchased a 20% share of a £100k property (for example) but it only sells for £85k, the developer DOES NOT receive £80k and you only £5k of your original equity. Certain property developers offer their own shared-equity schemes where this IS the case, losses aren't shared and they get ALL their money back.... be wary of these and make sure you read the small print. These guys are out to make a profit, the Government aren't.

Secondly, I teach economics as a profession. Whilst I would like to believe this is some grand conspiracy theory to prop up house prices, it really isn't. There is enough money allocated in this budget for 10,000 home purchases. There were almost 30,000 mortgage approvals in February 2011 alone.... that's 1/3 of one month's mortgages. That really is not enough to prop up an entire industry.

Thirdly, house prices are always going to rise in the long-term. Inflation cannot, and never will be eliminated, as it's impossible. Also, we live on an unbelievably small island so land is at a premium... Canada for example is home to less than half of the population of the UK in a country that is larger than Europe. It's no wonder that housing is expensive. Lastly, the population of the UK is growing and construction of housing is not keeping pace, especially thanks to the recent recession, credit crunch and bleak future outlook. This means demand for housing is likely to outstrip supply, pushing prices up.

It's better to be partly on the ladder than off of it completely pi$$ing your money away into someone else's back pocket. Why has no-one looked at the positive points of these schemes?

1. You have a brand new flat/apartment/house. The advantages are obvious. Brand new fittings, fixtures, carpets, appliances, roads, landscaping etc. Wear and tear is simply not an issue. Any damage to the property will be caused by you! Discovering damp, structural problems, building regs associated with dodgy antiquated houses, discovering infestations etc are simply not an issue.

2. As the place is brand new, there is a 10-year NHBC warranty on any property.

3. You are buying a SHARE. If you are worried about the risk in the housing market, by definition, you are minimising your exposure to the fluctuations in house prices. You are able to buy future shares in the property any time you wish.

4. Interest-rates are at an all-time historic low. This is a buyer's market IF you have the finance.

5. The combined rent, management fee and mortgage payments amount to 28% LESS than renting the cheapest one-bedroom flat I could find in the private rentals market.

6. If you wish to make any extra payments on your mortgage you are free to do so any time you wish. In fact, I was encouraged to do so.

7. Resale is not an issue. There is lots of pent-up demand from first time buyers in the market and this is likely to persist into the future. The properties made available to you are obvious first-time buyers properties in nicely developed areas and as such will always be in demand.

8. The property I am purchasing is by no means a "shoe box". Otherwise, I wouldn't want to live in it. It's as simple as that. Renting a one-bedroom studio (bedsit) is still 28% more expensive than my monthly outgoings. You are allowed to purchase a property with one "extra" bedroom than you require for your needs, if you so wish.

So, all in all, the Government schemes really aren't a scam. I have to admit, I was of the belief they were "a bit fishy" and I have been trying to find the catch by reading all the small print. The only real catch is that living in an apartment there comes a management fee, and this will need to be paid regardless of my share, be that 25% or 100%. This really is miserly though at around £24 a month and goes towards repairs, landscaping, office staff and subsidising rents... there is a reason for it. You even have the right to challenge the management fee if you don't agree with it.

All of this talk of "Oh, you'll go straight into negative equity on this scheme" is rubbish. Where I live house prices are rising. ANYONE who buys a property runs the risk of going into negative equity, and unless you can predict the future this is a risk everyone has to take.

The other option is to save a deposit... well. I don't know about you but I don't have £20k+ hanging around nor do I have an account with the Bank of Mum & Dad. If I were to rent, given average rent prices, this would take me somewhere in the region of another 8 years to get together on my current salary. I tell you what, I value my TIME on this planet more than what's in my wallet... it's just paper. I don't know about you, but I don't enjoy living at home in my 20's. This scheme allows me to take a cautious first-step onto a rung on the property ladder in a great, brand-new apartment whilst actually accruing equity in a property rather than pi$$ing my money down the toilet like private rentals do. In a few years I plan to have enough money, together with the sale of the equity in the apartment to get a 20% deposit on a much larger property.

I hope this post has been of some help, if anyone has any particular questions about the scheme I am on then fire away.

Muhasib

Thirdly, house prices are always going to rise in the long-term. Inflation cannot, and never will be eliminated, as it's impossible. Also, we live on an unbelievably small island so land is at a premium... Canada for example is home to less than half of the population of the UK in a country that is larger than Europe. It's no wonder that housing is expensive. Lastly, the population of the UK is growing and construction of housing is not keeping pace, especially thanks to the recent recession, credit crunch and bleak future outlook. This means demand for housing is likely to outstrip supply, pushing prices up.


A very measured appreciation of the key worker scheme; as you have the expertise can I ask whether your above assertion also applies to Japan after all they have had deflation for much of the last 20 years - are your comments about inflation being impossible to eliminate just relating to the UK? I guess you're not a follower of the Chicago School?