Budget 2013 live....

chewmylegoff

ukcarper wrote: »

Have you got a link showing that

Yes - the same mainstream articles that I expect you have read. There is one on bbc.

chewmylegoff

In year six, borrowers will have to pay a 1.75% annual fee, which will rise by 1% above the Retail Prices Index (RPI) measure of inflation every year after that.

Annual fee- not a one off fee.

http://www.bbc.co.uk/news/business-21849974

Graham_Devon

chewmylegoff wrote: »

It is implicitly stated - interest free for 5 years. So after that there is an interest charge every year. First year 1.75%, subsequent years rpi + 1%.

Do you read it as 1.75% for year 6 and then say 5% (4% RPI + 1%) for year 7?

That's how I initially read it and how I heard it explained on Radio 5 earlier.

However, on reading again, Ukcarper has a good point, and depending on the website, it can look as if the 1.75% inflates by RPI+1%.

Everyone seemingly has their own thoughts on it. MSE for instance suggests the fee rate rises by RPI. The telegraph implies the rate will jump to 5% ( for example) at year 7.

ukcarper

chewmylegoff wrote: »

It is implicitly stated - interest free for 5 years. So after that there is an interest charge every year. First year 1.75%, subsequent years rpi + 1%.

This is what it say on guardian

After 5 years it will attract a fee of 1.5% which will rise annually by RPI+1% have you got your quote.

Thrugelmir

chewmylegoff wrote: »

It is implicitly stated - interest free for 5 years. So after that there is an interest charge every year. First year 1.75%, subsequent years rpi + 1%.

So lending multiples on offer will reflect both the interest payable and capital repayments after the initial 5 year term has expired.

Wouldn't appear to be inflationary to house prices. If anything a dampner.

ukcarper

Graham_Devon wrote: »

Do you read it as 1.75% for year 6 and then say 5% (4% RPI + 1%) for year 7?

That's how I initially read it and how I heard it explained on Radio 5 earlier.

However, on reading again, Ukcarper has a good point, and depending on the website, it can look as if the 1.75% inflates by RPI+1%.

Everyone seemingly has their own thoughts on it. MSE for instance suggests the fee rate rises by RPI. The telegraph implies the rate will jump to 5% ( for example) at year 7.

It is confusing I suppose we will have to wait and see.

If you are right the goverment wins twice hpi + RPI

Graham_Devon

ukcarper wrote: »

This is what it say on guardian

After 5 years it will attract a fee of 1.5% which will rise annually by RPI+1% have you got your quote.

Yes, so it will end up a lot more than £1,700 after 25 years. Basically (ignoring inflation for a minute) it's £600 a year on a 30k loan.

Cheap loan, yes. But all an extra cost to buying the house. The fact you have to sell or remortgage with all this in mind only makes the problem worse a few years down the line.

And yes, the government win twice. As I said, it's both taking equity and charging you for the loan. You lose 3x over. Initially on the value due to newbuild and for those 2 reasons stated.

chewmylegoff

We're both wrong - but I am less wrong.

It is an annual fee - but it is the percentage at which that annual fee is charged which increases in line with rpi.

Y6 = 1.75%
Y7 = 1.75% * (1+RPI) so if rpi is 4% the annual charge in Y7 is 1.75% * 1.05 = 1.873% (it looks like you have to pay this in cash rather than it being added to the loan).

Etc

http://www.homebuy.co.uk/pdfs/FirstBuy%20Buyers%20Guide%20040811.pdf

Page 13 explains

ukcarper

Graham_Devon wrote: »

Yes, so it will end up a lot more than £1,700 after 25 years. Basically (ignoring inflation for a minute) it's £600 a year on a 30k loan.

Cheap loan, yes. But all an extra cost to buying the house. The fact you have to sell or remortgage with all this in mind only makes the problem worse a few years down the line.

And yes, the government win twice. As I said, it's both taking equity and charging you for the loan. You lose 3x over. Initially on the value due to newbuy and for those 2 reasons stated.

It's not clear will the fee be payable at RPI +1 every year or will the original fee rise by RPI +1 do you owe the original 20% or 20% of house value will will have to wait until we see fine print.

grizzly1911

wotsthat wrote: »

He got roasted on R4 this afternoon. Asked the question "what if house prices plunge" he couldn't or wouldn't answer. He was pressed for an agonising period of time until the presenter said "our listeners will recognise you didn't answer the question"

I didn't feel sorry for him.

Never have felt sorry for him.