Taxpayer to take on mortgage risks of first-time buyers

CLAPTON

so the assumption is that the banks actually have lots of money available for mortgages but the only thing stopping them lend is that people don't have enough deposit

gailey_2

I came to conclusion this morning the policy is being seen to be seen

build 16000 new home only 3200 affordable!
yet they aim to build 140,000 by 2015?

as potential ftb in future

I dont want to buy a shoddily built newbuilt shoe box that does not meet needs of my family and pay extortionate morgage rates ovestretching ourselves to something we wouldent wish to buy.

would rather wait longer save bigger deposit 15-20% and buy older property.

watching sky news and womdering what shovel ready means?
does that mean relaxed planning to allow developers to build more?

end of day its drop in ocean

lets reveiw in 2015 see how many people its helped?

RenovationMan

Looks like the government is doing everything it can to prevent a fall in house prices.

Linton

DaddyBear wrote: »

I don't get it. Why is the taxpayer needed to guarantee the mortgages? I thought mortgages were more affordable now than ever before.

Mortgages are being rationed. For those people who can get one they are very affordable.

The_White_Horse

this whole scenario is a disgrace. if you can afford a house, buy it. if you can't - rent or live with your parents, or in a hostel or wherever else you choose.

when will people take responsibility and STOP relying on the Govt in every aspect of their life???????

grizzly1911

This has already had a good airing here:-

https://forums.moneysavingexpert.com/discussion/3616605

IMO

• It will have little effect,
• Pandering to the construction industry,
• It will create inflated FTB prices leading short/medium losses for the borrower.
• Create Higher risk lending which will leave the tax payer picking up the bill if the banks are daft enough to relax their criteria on affordability
• I wouldn't want to risk it, FTB on this scheme, the way the economy is unless I was in a very secure job.

BBC had a couple on news , who as well as saying the deposit was an issue also cited affordability as an issue too. This is likely to encourage more people into the market who perhaps shouldn't be there at this time.

shortchanged_2

It's another ill thought out, desperate attempt by a desperate government to protect their personal vested interests.

Graham_Devon

I got highest rated comment on the BBC News article so far out of approx 200 comments.

Go me

Thought I'd have a go, as my thoughts are going out to more than just this sub forum filled with one person with several usernames, landlords, uber persuasions and a few normal folk.

Quite proud of my achievement on that one

Queue 5 people rushing over to the BBC news article and registering to vote me down

chewmylegoff

biscit wrote: »

"The Taxpayer" has made a profit from bailing out banks, many of them have paid off their loans with interest.

I think you will find we are still very much in the red. By over £100 billion.

michaels

I guess it depends why the banks are not lending?

Is it because it is not profitable - ie the rate of returns less likely losses on default is less than they can earn from the money elsewhere?

Or is it because of govt imposed rules on capital adaquacy that require lenders to hold lots of extremely expensive capital for any property lending over 85% ltv?

Suppose as a bank you can borrow at 1% and lend at 5% that is a 4% margin. Now suppose that with the lending if a borrower defaults you lose 20% of the sum advanced (95% mortgage, house sells for 20% below purchase price plus 5% costs). Now if 1 in 25 (4%, I believe this is far above observed rates even for the lowest deposit class of borrowers) of borrowers default each year you are still making a nice return (4% profit on 96% of loans, 20% loss on 4%) of about 3.04% or 2% more than the cost of the funds.

So why are the banks not lending? Is it because the business is not technically profitable or is it because govt rules on capital make it unprofitable? Obviously if the tax payer offers a free gaurentee for the most risky 'equity' tranche of the borrowings that is not good business for the tax payer but maybe it is needed because the mortgage market has become dysfunctional? Remember we are not talking about 100% mortgages to people who have not demonstrated any ability to save and in the majority of cases mortgage payments will be lower than the rental payments that the borrowers are already making. Of course it is not risk free, there is 'systemic risk' that an economic collapse will push up unemployment and thus defaults sharply but even in this case the state would still have to provide housing so is there really an extra cost to society?