Taxpayer to take on mortgage risks of first-time buyers

gailey_2

I cant give most up to date advice as last time we went for morgage reveiw was 2007 but

barclays offfered us £125k on combined income of £52,000 at time
abbey- £145k
northern rock was complex think it was £160k morgage +secured loan of 20k on top £180 k in total

barclays at time 125k wouldent have been enmeough to buy flat in decent area at time
abbey wasent really enough to buy us what we wanted looking at houses between 160-200k
northern rock decided against as I dident think we could afford it and my dad said sounds like a disaster.
we could have not a morgage at time but think we would have hit trouble and we were being responsoble by not buying at that time and although hubby has his regrets I dont as was at height of market and we wanted to have another baby then the crunch happened.

Think i was cautious as my dad and aunt were reposssed in 1990,s.

The biggest stumblimg block for me at the time was a repayment morgage over 25years was over £1000 a month plus we had to have life insurance /buildings on top , plus maintainace costs.

Our rent at time was 650, no maintainace costs and just house contents so at time felt we were overstretched.

Our 2mates who did buy in negative equity still and switched to interest only when they hit trouble.

just saying yes deposits hard and part of issue but you need money for moving, dtamp duty, legal costs, surveys movings not cheap!

Our ideal house is about 200k so aim is to save least 20-30k deposit
cleared all debts
another 5k in savings account for moving cost
ensure that monthly repayment is affordable


well done graham always enjoy your well thourght out posts .

I think bank lendings down to them having to hold so much capital which means less lending.

they only lending to people with exceptional cradit rating or secured/guarantor lending.

we know the banks not lending as they released that we will give money to businesses last month scheme so its same in housing.

think we heading for another credit crunch if europe falls.

kabayiri

Are they building the right sort of accommodation in places like London ? Perhaps they need more 'living units' rather than full blown houses to support those who need to work in the capital but not necessarily live there.

There isn't the same sort of housing shortage in the regions.

HAMISH_MCTAVISH

SO as it turns out, this will be paid for by a 3.5% MIG charge paid into an insurance fund from the developer.

Chances of the govt actually paying anything are virtually zero.

Graham_Devon

HAMISH_MCTAVISH wrote: »

SO as it turns out, this will be paid for by a 3.5% MIG charge paid into an insurance fund from the developer.

Chances of the govt actually paying anything are virtually zero.

Your optimism has always been overflowing Hamish.

What will you do if they do pay out? Turn around and blame something else?

N1AK

worldtraveller wrote: »

The Prime Minister and his deputy, Nick Clegg, will unveil proposals to help first-time buyers of new homes by carrying part of the risk of their mortgages.

They could help young buyers by funding more house building so that their were enough homes available and they could be priced afford-ably. Instead they are helping home owners by trying to prop up property prices and making FTBs take on massive debts to buy a home.

If the government actually wanted to help young people it would sit on its hands and let the market correct. Instead it spends years and billions of pounds playing about with the market and ultimately goes with whatever makes voters happy (God forbid the government risk the ire of home-owners by not looking like they are trying to stop prices falling).

Thrugelmir

worldtraveller wrote: »

So, where's the profit? The profit that, for example, the taxpayer was going to get from the sale of Northern Rock?:idea:Oh, hang on! :silenced:

If retail banking is so profitable. Why did NR collapse? Why didn't the Government merely provide funding in the form of equity to recapitalise the business?

For retail banking to become profitable. Base rate has to rise. There's insufficient margin margin between the cost of raising deposits and lending rates.

Retail banking from the early 2000's was highly profitable due to cross selling of products (such as PPI) and therefore subsidy of mortgage rates.

dtsazza

N1AK wrote: »

If the government actually wanted to help young people it would sit on its hands and let the market correct.

Absolutely.

We need less "initiatives" in the housing/mortgage market, not more.

doire_2

The bulls are very silent on this scheme. I thought they would have been starting thread after thread on the subject. Maybe they too realise its a drop in the ocean

gailey_2

Anyone watch bbc daily politics today.

The guy representing morgage lenders got very shuffly when asked will you lend out more even with guarantee? was lukewarm.

Them grant said thats sensible reaction he was hoping for that he dident wish to see a return to iresposible lending!:rotfl:

she also asked why should banks need this as we lent money out they should be lending not offered more incentives!

Think few skeptical this would make a difference.

doire_2

Some media reaction


http://www.guardian.co.uk/money/2011/nov/21/mortgage-guarantee-scheme-concerns-lenders

Banks and building societies say they were coerced into agreeing to the government's mortgage scheme, which has been rushed through with too little thought

Lenders have said there are insufficient details available to decide whether government plans to guarantee mortgages on new-build homes will mean more deals and cheaper rates for borrowers with small deposits.


Several lenders have expressed concern that measures to make buying new-build properties easier were being rushed through with too little thought. One which refused to be identified said the proposals were "as welcome as a cup of cold sick", while another described them as "insane".


The government has announced a mortgage indemnity scheme designed to encourage lenders to offer mortgages of up to 95% of a property's value by guaranteeing that they will not lose money if the property falls into negative equity and is repossessed. The guarantee will be funded by developers and taxpayers.


However, lenders have complained they were not consulted until last week and were coerced into agreeing to the scheme. One detail which still seems unclear is how much of the indemnity the government will be putting forward. Although 5.5% of a property's value has been suggested by some sources, with another 3.5% contributed by builders and 5% by the borrower, this would mean the lender would still be liable for 86% of the value.

This is likely to prove too high for most lenders, which are usually very cautious about lending high loan-to-value (LTV) ratios on newly built properties, especially flats, which are notorious for suffering substantial drops in value after being sold for the first time.

Some lenders offer lower LTVs on new-build flats than they do on houses. Clydesdale and Yorkshire banks, for example, underwrite all loans on new-builds on an individual basis and differentiate between houses and flats.

Several lenders already offer 95% loans, but these have high interest rates. Borrowers with just 5% deposit can find themselves paying more than 6% on a mortgage – more than double the rates available to those with 20% to put down.

A spokesperson for HSBC said: "We are in principle supportive of the indemnity scheme – the initiative will support the activity we already do to help first-time buyers on to the housing ladder. So far in 2011 one in eight first-time buyers bought their home with an HSBC mortgage. We will work with the government to meet the March 2012 start date."

Elizabeth Holloway, a spokeswoman for the Woolwich, said: "It is all to be confirmed in terms of details, but we have agreed in principle to participate."

Holloway said the scheme was similar to Woolwich's Perfect 10 deal, a scheme run with developer Bovis Homes which allows borrowers to buy a new-build property with a 90% mortgage. The rate on that scheme is 3.79% – lower than on its other 90% loans.

Nationwide, which offers a 95% mortgage with a rate of 6.14% through its Save to Buy scheme, and Yorkshire Bank, which charges 6.19% on its 95% deal, said it was too early to say if the guarantee would allow them to cut rates.

Ray Boulger, senior technical manager at broker John Charcol, said lenders were currently having to charge more for large loans as banking rules meant they had to have larger amounts of capital in place to back the mortgages.

He said that to be effective the guarantee scheme would need to allow lenders to fund their mortgages as if they were only lending smaller amounts. "If this doesn't bring down mortgage rates for 95% loans then the whole thing is completely pointless," he said.

The Council of Mortgage Lenders' director general, Paul Smee, said it was "anticipated that lending within the scheme will attract relief on the regulatory capital that would otherwise be required on high loan-to-value lending, because of the significant mitigation of the lending risk."

However, the CML said details were still being ironed out.

STUART BASELEY, HOUSEBUILDERS FEDERATION

This (the indemnity scheme) is a great deal for people wanting to buy a new home, whether first-time buyers or existing home owners who are unable to trade up.
In recent years many people have been unable to realise their dreams of buying a home because of the huge deposits required by lenders. This scheme will allow people to buy their new home on realistic terms and help in particular hard pressed first time buyers.
It will also be a huge boost to house building. Since 2007, the biggest constraint on homes being built has been mortgage availability. This scheme will see more desperately needed homes being built, create jobs and give the economy the boost it needs.



LEANNE WOOD, PLAID CYMRU

There are serious questions about how David Cameron's scheme is going to work in England. With the taxpayer underwriting the cost, will this mean that Welsh taxpayers are going to be paying to help people afford much higher mortgages in London and the south-east of England?
If government is going to spend money on housing then it makes sense for them to own the assets so that there is a long term social investment and benefit, both for the government and community. This is why Plaid Cymru are calling for a new social housing building programme in Wales.


DAVID PARSONS, LOCAL GOVERNMENT ASSOCIATION

It is disappointing that the government has increased councils' housing debt by over £2bn in line with September's inflation level of 5.6% (RPI).
Being saddled with billions of pounds worth of debt is going to severely restrict councils' ability to improve quality housing and invest in new homes to meet future needs. This is vital to help grow the economy.
When this is combined with the government's plans to keep the vast majority of right-to-buy receipts and the restrictions on councils' borrowing ability, the higher debt levels could seriously undermine the future of council housing.


ANDREW CHARALAMBOUS, UK INDEPENDENCE PARTY

UKIP acknowledges this as a viable and necessary strategy to propel new jobs and growth. However, our concerns are in the detail of precisely how this scheme and its parallel infrastructure projects are to be funded.
Even more importantly, the manner in which the taxpayers investment will be protected. As the government appear not to have outlined the detail of these parameters it's hard not to be suspicious about the diversionary nature of this tactic.


CAMPBELL ROBB, SHELTER

We are concerned that schemes to help first-time buyers and council tenants will simply encourage people to overextend themselves, while doing nothing to address the sky-high cost of housing.
This strategy also does almost nothing to help the growing number of families living in insecure private rented housing with hardly any protection from rogue landlords or unexpected rises in rent. Unfortunately these aren't the bold and radical solutions we need to solve a housing crisis that's been decades in the making.


DAVID ORR, NATIONAL HOUSING FEDERATION

The government deserves credit for recognising the huge economic and social value of investing in house-building, but the announcement today is a real missed opportunity.
Today's announcement of an additional 3,250 affordable homes is a drop in the ocean. Ministers need to be bolder and go much further to fix the broken housing market and they can do it in a way that is effectively cost neutral.


ALEX MORTON, POLICY EXCHANGE

The real problem today is not the high mortgage required but the high cost of housing in the first place. You cannot solve the problem of expensive housing just by encouraging greater lending.
The key isn't demand but supply. We've built fewer and fewer homes despite higher immigration and, much more importantly, older people are living for decades in large family homes.
No-one wants to push out people who worked hard for their home, so we need to build more quality family homes where people want to live - in attractive new city suburbs across the UK.