NewBuy - a scam to transfer from poor to rich

PasturesNew

Why don't they just sell buyers Mortgage Indemnity Guarantees like we were forced to buy (at about 1% of sales price)?

Running_Horse

I would rather see a tax on the land banks of existing builders who have (often deliberately) refused to build the houses this country needs. Any money raised could be used for tax perks to smaller building companies able to do a better job.

Idiophreak

thelawnet wrote: »

[*]new-builds are inevitably hideously over-priced because the builder wants to make a profit.

If new builds were hideously overpriced:
1) Nobody would buy them
2) No lender would touch them

Builders do want to make a profit. Typically, however, whenever they build it's something like 1/3 land 1/3 build cost 1/3 profit. So they do pretty well out of just selling the things at market rate.

Of course, using shared equity and shared ownership schemes, builders often try and intimidate buyers saying they won't accept less than the asking price on the scheme. The *asking price* is normally inflated in value. Sometimes this works, they mug some poor sucker and make a few more quid, sometimes the lender downvalues anyway. This is avoided by the application of common sense: If you're a buyer, you shouldn't pay more than the thing's worth, no matter how much encouragement you're given, or...

thelawnet wrote: »

[*]this means that a buyer at 95% LTV is in negative equity the day he exchanges

thelawnet wrote: »

[*]the scheme will allow people to buy homes worth up to £500k. At 95% LTV, this is £475k borrowed. This implies an income of well over £100,000 per year. According to statistics, and the government, people earning this much are 'the 1%', the super-rich, taxed at 51 and 61%. So this is a scheme to allow the very rich to buy expensive houses, using money taken from the very poor, by means of taxation

I agree that £500k is quite a lot to buy on one of these schemes...but in my area, and many other parts of the country, there are plenty of 3 bed homes for £500k. These aren't mansions and a couple earning £100k per year aren't super rich. Less than a third of their wage will be taxed at higher rate (assuming 50/50 split). You're focussing on the worst case and your argument is weakened by doing so.

Wookster

I have to say, the government's housing policy is a real shambles. On the one hand they talk of the ills of debt fueled property bubble yet they do nothing to ease the building of new properties. Scams like the scheme mentioned above simply attempt to reflate the bubble.

Grant Shapps really doesn't have the most coherent strategy at all.

thescouselander

Idiophreak wrote: »

If new builds were hideously overpriced:
1) Nobody would buy them
2) No lender would touch them

Most lenders require a 20% deposit on a new build while accepting a much lower deposit on older houses. Make of that what you will.

Idiophreak

thescouselander wrote: »

Most lenders require a 20% deposit on a new build while accepting a much lower deposit on older houses. Make of that what you will.

I'm not disputing that you pay a premium for a new build...and part of that is quite understandable: People frown on spending 10k extra on a new build, but nobody thinks twice about buying the second hand house for the 10k less then spending (wait for it) 10k replacing the windows/kitchen/bathroom/whatever. This premium, obviously, is lost as soon as you've moved in - hence the lenders requiring a more favourable LTV.

I'd suggest there's a bit of a difference between this and all new builds being "hideously over-priced", though.

thelawnet

Idiophreak wrote: »

I agree that £500k is quite a lot to buy on one of these schemes...but in my area, and many other parts of the country, there are plenty of 3 bed homes for £500k. These aren't mansions and a couple earning £100k per year aren't super rich. Less than a third of their wage will be taxed at higher rate (assuming 50/50 split). You're focussing on the worst case and your argument is weakened by doing so.

Well not really. They are supposed to have thought this scheme through, and that includes the wisdom of putting £500k mortgages in.

£500k house = £475k mortgage.

A couple both earning £50k are well-paid ANYWHERE.

As I already said a 25-year mortgage is over £3k/month, and a couple earning £50k each end up with less than £6k/month, net. So they will be spending well over half their net income on mortgage payments. Which is too much. And, this mortgage lasts for a quarter of a century! Incomes are not going up, what happens if they want to have a baby or something?!

5 times joint salary is bonkers.

And anyway, if the joint income is £100k, they should be able to find a bloody deposit.....

Emy1501

Idiophreak wrote: »

I'm not disputing that you pay a premium for a new build...and part of that is quite understandable: People frown on spending 10k extra on a new build, but nobody thinks twice about buying the second hand house for the 10k less then spending (wait for it) 10k replacing the windows/kitchen/bathroom/whatever. This premium, obviously, is lost as soon as you've moved in - hence the lenders requiring a more favourable LTV.

I'd suggest there's a bit of a difference between this and all new builds being "hideously over-priced", though.

lenders are happy to lend up to 95% of non newbuild properties without any fancy government intervension.

They are not prepared to lend on new builds above 80% because they are 10-15% overvalued.

RUN_RABBIT_RUN

got to concur with most people here and say this is all about the builders and naff all to do with ftbs

the £500k limit is rather ridiculous in that respect

that's not to say that people won't take this scheme up though

Idiophreak

thelawnet wrote: »

Incomes are not going up, what happens if they want to have a baby or something?!

5 times joint salary is bonkers.

Hang on...why aren't their incomes going up?

And there's no saying anyone would ever actually get paid 5x their salary...As you said, more likely someone would need to earn best part of 200k to be considered.

That said, you've convinced me. £500k is too much to be considered a FTB home. I still don't think it's the Playboy mansion you're envisaging, but I think in most cases there's probably something cheaper people could move to first. (I've no idea where I *would* draw the line, though...)

I'd be interested to see the stats of who they actually end up lending to, though. I imagine most people on 100k+ won't feel the need to use this scheme...