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

76rosie

Suarez wrote: »

Give up niceties such as holidays, going out, new cars etc for a couple of years and save like mad.

I lived in one room ( in a shared flat) with OH in Tottenham. We both went to work, saved 13k. Moved to Barking, bought 1 bed flat 90k.

now live in flat for last 6 months.

Better to suffer because the bills keep coming. Service charge, council tax, water, insurance, gas and electric, repairs and food, petrol etc.

And then you'll want to upgrade...

I've started as I mean to go on, you never know what is around the corner.

leitmotif

For years I've been arguing that the only way out of a crisis born of overlending and overborrowing is to encourage people to take out more debt, preferably funded by the taxpayer, but nobody listens. For the sake of the economy, we must keep house prices inflated at all costs. How else can we generate prosperity? If the average house price costs 6 times the average annual salary, and university fees are 9-10 times the cost of university fees in neighbouring countries, and pensions and banks can't be relied on, then people will be forced to do two things: 1) work their !!!!!! off (which might give us a fighting chance of developing a proper economy that works and isn't based on stuff Asians can do cheaper); and 2) spend all their cash out of sheer despair. Meanwhile inflated house prices will devalue the currency, because if the unrealistic number on the price tag won't come down then the value of that number has to, and that'll make it cheaper for our (admittedly broke) neighbours to buy what tatty goods and shoddy services we do still produce ourselves.

Hooray for Osborne propping up the housing market! It's the best plan he's come up with, and I bet it'll be every bit as successful as all the other measures!

Thrugelmir

saayinla wrote: »

But I suspect property prices will go up again by the Time the scheme kicks off as a lot of people will be able to get a mortgage due to the guarantee hence creating another false economy , possibly resulting in another housing crash? No?

Available funds for mortgage lending are projected to fall by as much as £300 billion in next 5 years. Excluding Government support such as FLS.

So while this appears a good proposal. Is merely putting into place a structure which enables the property market to continue to function.

There'll be no easing of lenders criteria in underwriting. So isn't the basis for a price boom. More of a cushion to break the fall.

claret_mike

Will lenders look at affordability now or in 5 years?

"It is interest-free for five years. From year six the rate is 1.75%, which will rise annually by RPI inflation plus 1 %."

so does that mean that assuming RPI is 2.5% then in year 2 its 3.5%? or is it that it will be 1.75% + 2.5% + 1% (5.25%)?

redonion

BritishBulldog wrote: »

Saayinla, im sure youre absolutely correct, it will create something of a mini-boom in prices, which certainly sucks...on the other hand i suspect the market will now die for the remainder of this year and we are still in a position to buy quick as FTBs if the right place rears its pretty little head.

The knowledge that the "help" is coming at the end of the year will encourage some sellers not to put their place on the market until then, in the expectation that prices will rise. That means some FTBs may not be able to find a suitable place to buy before the end of the year.

redonion

Leon_W wrote: »

A couple of posters here have thought through the consequences and come up with the right answer.

All it will do is make buying a more expensive home more affordable and houseprices will rise to compensate for it.

These schemes just distort the market.

It's almost as if we need to build more if we want houses to be more affordable, isn't it?



I'm an FTB who is distinctly discouraged by these announcements: this is only going to make it less likely that I'll manage to buy a place soon, and more likely that if I do I'll end up with higher mortgage debt, spending less. That's good for the economy how, exactly??

Edit: I'm talking mostly about the deposit backing, not the new-build thing. New build = good, though I wonder if this is the best way to encourage it.

Thrugelmir

redonion wrote: »

I'm an FTB who is distinctly discouraged by these announcements: this is only going to make it less likely that I'll manage to buy a place soon, and more likely that if I do I'll end up with higher mortgage debt, spending less. That's good for the economy how, exactly??

Wait for the full proposal before judging.

Much might happen in the intervening period as well.

Kidg

All the news reports suggest that Help To Buy is available on all new homes but I think it is at the builders discretion? Can anyone clarify this before everyone gets excited & rushes out to buy!

leereni

Please somebody clarify for me.

1. The new scheme (help to buy) is for all buyers not just first time buyers.

2. When does this start? I just heard on the news the loans (20%) start from this April on new builds and jan 2014 for any homes.

3 what typesof credit history will you need? Perfect or some with maybe some minor issues in the past?

redonion

Thrugelmir wrote: »

Available funds for mortgage lending are projected to fall by as much as £300 billion in next 5 years. Excluding Government support such as FLS.

So while this appears a good proposal. Is merely putting into place a structure which enables the property market to continue to function.

There'll be no easing of lenders criteria in underwriting. So isn't the basis for a price boom. More of a cushion to break the fall.

Interesting point, and I can see that the changes should tend to cause the number of properties on the market to increase in 2014 (and decrease in 2013). But surely a huge influx of pent up FTB demand from buyers who can afford prices but don't have the deposit will have a significant effect on prices, especially at the lower price end?

In particular, your price prediction seems based on an assumption something like that funds available for mortgage lending do not depend much on the supply of purchasers who want to buy houses that they can afford (afford at some given level of risk)? What reason is there to think that is true?

But I probably just don't understand the economics: certainly I don't understand why LTV - as opposed to absolute debt value - seems generally to be thought to be a good parameter to describe lender risk.