MSE News: Budget 2013: Help to Buy mortgage scheme to launch

NPowerUser

Contrary to what most of us feel on these boards, I suspect the broader population will applaud this scheme.

Rising house prices seem to be what the majority want.

I had a little chuckle when I read this article.
http://www.dailymail.co.uk/money/mortgageshome/article-2296815/Budget-2013-Will-Help-Buy-assist-families-unable-property-ladder.html

"We are waiting for the property market to go up so we can upgrade to a bigger house"
Perhaps they are not aware that a consequence of this statement is that if their house price increases, then the one they buy will cost more than before?

KTF

If their house isnt selling then they need to find out the reason rather than sitting around waiting for 'the property market to go up' (whatever that means).

Up in value or up in smoke, could be either

shortchanged_2

biglugs wrote: »

The intention of this scheme isn't to keep house prices high - it's to allow people to get access to housing which they can't currently do because of mortgage availability problems.

There has been lots of talk about this driving up house prices, but if it is really successful it might do the opposite. My reasoning:

- house prices are currently high because of the 1m+ Buy to Let properties which are rented out at extortionate rents
- landlords can charge high rents because you have no choice, because you can't buy
- this scheme allows those trapped by high rents to get out and own their own home
- landlords have to lower rental prices to compete with the purchase option
- some landlords find that BTL no longer makes economic sense, so decide to sell up
- more houses on the market means more supply so helps to keep prices down.

Ask yourself one question.

Why do people need these schemes to get on/move up the property ladder?

In a properly functioning housing market there should be no need for all these schemes and house buyers should be able to buy a house with a 10%+ deposit and reasonable lending multiples.

Ultimately all these schemes show is that the housing market is overpriced if people need all this 'help' to get on/up the housing ladder

fossman

When I saved for the deposit for our house (£12,000) I lived like a hobbit for a year, I got my outgoings down to just petrol and mobile phone, my parents helped by letting me not pay any board.

A guy I work with wants to start saving for a deposit so I explained how I had done it, his reply was "I am not going to not live for a year".

I tried explaining that it was only 12 months of sacrifice but he wasn't interested.

Thrugelmir

daverave7 wrote: »

So, if house prices rise by 4 % per year for the next 5 years (however unlikely), it would be essentially like having a loan or mortgage at 4 %. Am I right?

However the reality is for many a negligble increase in disposable income and roaring inflation.

So the "deposit" needs to be funded in some way. Or will progressively eat into the equity in the property.

leitmotif

biglugs wrote: »

There has been lots of talk about this driving up house prices, but if it is really successful it might do the opposite. My reasoning:

- house prices are currently high because of the 1m+ Buy to Let properties which are rented out at extortionate rents
- landlords can charge high rents because you have no choice, because you can't buy
- this scheme allows those trapped by high rents to get out and own their own home
- landlords have to lower rental prices to compete with the purchase option
- some landlords find that BTL no longer makes economic sense, so decide to sell up
- more houses on the market means more supply so helps to keep prices down.

This is logical, but I'd question whether the scheme will 'help' enough people to buy a home to have a significant dampening effect on rents. Realistically it might help a few tens of thousands of people, versus the million plus BTL properties you mention. Which may or may not lead to falls in rent.

Still, for me what the scheme does is allow naive individuals to be siphoned off into shoddy, overpriced new-build boxes. There's nothing worse than birdbrained overpayers willing to encumber themselves with as much debt as anyone will lend to them (be it a bank or the taxpayer via the government). You want to buy a reasonably priced house, and lo and behold along come a selection of total muppets who've been allowed access to 'credit' they can't really afford, and suddenly you lose out because you're not willing to match their offer (which they subsequently come to regret two years down the line when they can't meet repayments, even at rock-bottom interest rates). Anything that serves to get a few tens of thousands of those numbskulls out of the rest of the market, where the proper houses are, must at least have a silver lining!

Thrugelmir

leitmotif wrote: »

This is logical, but I'd question whether the scheme will 'help' enough people to buy a home to have a significant dampening effect on rents. Realistically it might help a few tens of thousands of people, versus the million plus BTL properties you mention. Which may or may not lead to falls in rent.

I suspect that the main purpose is those trapped in the rent cycle. Along with those that bought at the peak. That wish to upsize. As their family has grown for example.

The 5% equity required. Suggests that in the medium term house prices are going nowhere. (At least in certain circles). As the lack of availability of mortgage funding may well come as a shock to many people. Without any doubt there's a severe contraction on the way.

leitmotif

The trouble is the Brits are so fixated on the number on their house's price tag that they are easily appeased by ill-thought-out political measures to keep that number from falling (whether or not that's the primary purpose, it's the effect). I have some acquaintances who are vapidly vocal about the fact that their house cost them £250K five years ago and is probably worth the same or now, but sterling has collapsed over that period (25% fall versus the euro, for example, or nigh on 70% fall against gold), and inflation has been high for several years. That £250K number may not have fallen, but the value of it has plummeted. They'll be voting Tory, because apparently Grant Shapps and George Osborne have made them very happy. Ignorance is bliss!

leitmotif

Incidentally, over the past five years I've gone from tens of thousands in debt to a six figure deposit (none of it inherited, all sheer hard work). Unfortunately I still can't get a house, as over that period I've had two children (something I refused to put off any longer, as my wife and I weren't getting any younger) and my business is run from home, so we need four bedrooms. Our deposit has grown, but so have our housing needs, and I don't feel like handing over the fruits of my hard labour to some punk who thinks he deserves to receive triple what he paid for his house a decade ago purely because he has sat on his bum in it. This latest harebrained scheme may well be the last straw for us. We lived abroad in the past, and we were already considering moving back to get much more space for our money. It baffles me that the Brits will pay a quarter of a million or more for a 2½ bedroom semi where the master bedroom is a poxy 3x3m and the bathroom is only just big enough for a bath, a toilet and a sink! And when you consider that the £250K doesn't include all the interest they'll pay over 25 years...

Some muppets say to me that I should set my expectations properly, as FTBs have to start off small, but that's misguided. Traditionally FTBs would have something akin to a 10% deposit for a first home whose asking price was no more than 3½ times the average annual salary, and they'd be in their early to mid twenties earning no more than the average annual salary. I'm not in that position at all. I've saved up far more than a FTB. My family situation and my income are not like those of the traditional typical FTBs. I could afford a 3-bedroom hovel round here (£300K or more!), but that's not big enough, and so I've already started looking at property sites for other countries (I can run my business from anywhere - it's all web-based).

Wallhart

We know how this turns out.

Wealthy people will buy second homes (apparently nothing to stop them)

House pries go up which of course helps the older generation as usual.

The real problem is supply of houses. Have second home taxes etc. free up rental properties for purchase to increase supply. Reduce regulations to help new builds.

New builds are over priced as it is. Now there will be demand and they know they can inflate new builds even more.

Wealth created on house price inflation is a structural issue this country seems obsessed with. Is there any problem with trying to get measures which increases supply that also stabilises prices