Taxpayer to take on mortgage risks of first-time buyers

worldtraveller

I love the "off the record" quotes! :rotfl:

ChiefGrasscutter

...and the Daily Mash's take on it all

http://www.thedailymash.co.uk/news/society/housing-market-is-pretty-much-all-we-have-left%2c-admits-cameron-201111214570/

Blacklight

Won't be long before banks are lending 95% on self certs again now that they don't have to bother about who they lend to.

HAMISH_MCTAVISH

ardvak wrote: »

This is insane!!!

It is the same sort of sub-prime mortgage scheme which caused the banking collapse!

I can't believe even a madman would contemplate such a scheme, we have had our hand burnt and
Cameron is preparing to stick them back in the fire for another roasting!!

This is like a bad dream!!

Can you explain how a 5% deposit from borrowers with good credit ratings are "sub-prime"?

Can you also explain how UK mortgage lending at 5% deposit levels "caused the banking collapse"?

Oh, and while we're at it, can you explain why a 3.5% insurance fee wouldn't be more than enough? Preferably after researching current default rates.

HAMISH_MCTAVISH

ardvak wrote: »

Is is sub-prime because it is tax-payer guaranteed mortgages, the banks will lend like crazy as their is not risk to them, there only concern will be to lend as much as possible to maximise their bonuses (which they will).

It complete lunacy.:mad:

Oh right.

So basically you can't deny that 5% deposits are historically normal, prudent, and sensible lending.

And you also can't possibly claim that 5% deposit lending in the UK caused the global financial crisis.

So the best you've got is claiming that a govt guarantee might cause bankers to lend irresponsibly, despite the fact that the guarantee scheme will only cover banks for around 15% of the loan, and that 15% is being paid for by a 3.5% insurance fee on each house sold under the scheme.

You're talking absolute rubbish.;)

laurel7172

If I were inventing a scheme to put people into negative equity, I don't think I could do better than this.

But what does Cameron care? The Tories get their kickback from the housing firms and the little people foot the bill.

Graham_Devon

HAMISH_MCTAVISH wrote: »

Oh right.

So basically you can't deny that 5% deposits are historically normal, prudent, and sensible lending.

You must be worn out with all this massaging you are currently doing.

What it historically normal about the taxpayer taking the risk on behalf of banks when they lend this 95% mortgage?

the_flying_pig

HAMISH_MCTAVISH wrote: »

...So basically you can't deny that 5% deposits are historically normal, prudent, and sensible lending....

5% sounds low to me, H, really low.

5% deposits run the risk of selling a house to someone who couldn't afford a 6% deposit. a 6% deposit is nothing. a 6% deposit is [at 3.5% interest rates, 20 yr term, repayment] equal to only 6 months' mortgages payments [or 7 months with a 25 yr term] - so someone who cannot afford a 6% deposit also, by definition, cannot afford, in one go, 6 months' mortgage payments. someone who can't save as much as that, well, I don't think they're a particularly good risk at all. if a bank knows better and thinks it's profitable to lend to them then great, but taxpayers bribing them to do so...

also, we live in turbulent times. 5% house price falls are easily, easily possible. they've happened in, what is it, one or two out of the last four years. with 5% deposits you've got the risk of insta-negative equity.

we absolutely, absolutely, should just accept that deleveraging is painful but inevitable. i know [as i've said before] that you're just a bloke on a message board who wants the value of his houses to go up, but, seriously, find me anyone half sensible who thinks this is a good idea.

http://www.cityam.com/news-and-analysis/allister-heath/let-s-not-go-back-sub-prime-loans

the only redeeming feature of this is that it's for new build houses only. that's something at least.

as an aside, i genuinely don't know what yer typical minimum deposit requirements were in different decades. can anyone knowledgeable [i.e. with industry experience, not some bloke whose dad was once offered {etc}] enlighten us?

Graham_Devon

Hamish, question if I may...well maybe two.

1. Would you reccomend any member of your close family made use of this scheme?

2. Do you agree or disagree this is the government ushering people into instant negative equity? Afterall, new builds are overpriced in general, it's accepted by around 10%. Just like cars, as soon as they are resales, they lose a significant amount of value. With the builder paying 3.5% into a fund, this will push prices up further, so we could see 12% instant negative equity.

If prices fall just 5% over the next 2-3 years, you are looking at 12% total negative equity (due to the 5% deposit). Would you agree or disagree with this?

The only good thing about this scheme, in my mind is that it creates more houses. However, the price paid by the individuals buying, and possibly us, the taxpayers is significant. While I think the building of more houses is a good thing, I don't particularly think that building more houses and injecting more acute problems to an already distressed situation is a good thing.

In all honesty, I hope it's somewhat a failiure, like the other homebuy schemes (hence the need for this). I personally don't like to see people ushered in to be impailed on a spike.

wotsthat

Graham_Devon wrote: »

personally don't like to see people ushered in to be impailed on a spike.

It's a small mortgage guarantee scheme rather than some sort of strange and unusual punishment.

If it helps some FTB's into ownership and out of the rental market that sounds like a good thing.

Worth a punt I would have thought.

What more can the government do - they can't make banks lend and they can't make builders build.