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

marathonic

teabythesea wrote: »

Does anyone know where I could go to chat about this with someone? I'm 23 and we were never taught anything about mortgages at school. I have a 5-10% deposit, but a lot of this doesn't make sense no matter how many times I read. Please don't have a go at me or call me stupid, I genuinely need some guidance.

Best to wait until more detail comes out and continue saving in the meantime.

When the scheme comes into affect, I'd give it another couple of months to ensure that brokers have gone through the process with various banks and then go see a broker yourself.

That way, by the time you apply, the brokers will know how various banks are treating the scheme.

Thrugelmir

NPowerUser wrote: »

Only just over 2 years to re-inflate the housing bubble (7th May 2015).

The last roll of the dice in the feel good stakes before the Lib/Lab coalition?

I suspect that the housing market is more like a football covered in sticking plasters that constantly require replacing.

Holding house prices up protects the banks while they continue to restructure their balance sheets.

Next election may well be a case of which option is the most paletable. As given certainty that tax rises/austerity measures will continue into the next term.

teabythesea

Thanks marathonic. I really wish we could get this sort of "real" education in to schools, I feel totally clueless despite attending school college and now university. None of it has taught me anything about real life.....!

marathonic

Thrugelmir wrote: »

I suspect that the housing market is more like a football covered in sticking plasters that constantly require replacing.

I'm not sure what sort of an impact this will have on the housing market.

As previously stated, there are likely to be a small percentage of people who hold off on selling their property until the scheme kicks in properly in the hope of rising prices - but this decrease in supply is likely to be met with a decrease in demand due to the buyers themselves holding off until the scheme kicks in.

Over the extreme long term, it's likely to increase the overall supply in the market through increases in home building. This is likely to be counteracted by demographic changes and, when the economy improves, the return of some of our emigrants.

The net effect on house prices could be very low indeed. I do see a large movement of people from the rental market to the world of home ownership. You just need to consider the number of people currently renting and saving towards a 25% deposit today who are now able to avail of this scheme.

With this in mind, there could be some downward pressure on rents resulting in changes to the calculations involved in the rent v' buy decision - hence, more downward pressure on house prices.

Bearing in mind the complexity of the system and all the inter-related components, I see no major drops or falls over the next few years - I'd imagine the change will be below the rate of inflation either way.

My opinion is that a medium term (3-5 years) flat market is a good thing. People on interest-only mortgages are in a pretty bad position but, for the rest of us, the mortgage balance is reducing as the years go by. Every year, a percentage of the mortgages outstanding are being fully paid off - which will free up money to be spent elsewhere in the economy. There is also a percentage of mortgages every month where the repayments are bringing the homeowners out of negative equity which puts them in a position where they are able to trade up again.

Obviously, most would consider the mortgages in the years leading up to where the credit market dried up as those in most difficulty. If you put all mortgages in the 4 years up to 2007 in this category, then the worst of these mortgages are now 6-10 years into their repayment plan.

Mortgages from 2008 and after are likely to belong to people for whom, on the most part, they are affordable (due to them being taken out as lending criteria started to tighten up).

In Ireland, where things are a lot tougher, there were 11.9% of residential mortgage in arrears of 90 days or more as of the end of last year. I'd imagine the UK figure is lower and, in my opinion, is unlikely to rise much, if any, from here. Most of those who've managed to keep up mortgage repayments until now will continue to be able to do so.

BritishBulldog

Just another thought on this whole thing. The better half and i have 2 properties in mind that we were looking at to buy, and would have been putting in a bid probably next week, both with 10% deposits, and were looking at 5 year fixed rate, fee free mortgage from HSBC. Effectively we could still go ahead, but simply getting a bog standard non fixed rate, which is cheaper in the short term, then come next year, we could remortgage using Georgie-boys 20% loan, move onto a 5 year fixed and be paying 20% less on the mortgage. Does this sound right or am i missing something really obvious??

biglugs

Crashandburn wrote: »

Mortgages at more affordable rates? Not too sure how low you want them to go but 4.24% at 90% loan to value seems very cheap to me.

On an historic basis 4.24% is very good. But mortgages at 80% LTV will be at least 0.5% cheaper than those at 90%. On a 25 year mortgage for £180,000 (90% of a £200,000 home) this will mean monthly payments of about £50 less - around £600 a year.

While this shouldn't be a decision maker in a mortgage, that extra bit of cash will always be very welcome.

biglugs

Thomas_Hardy wrote: »

What about increasing interest rates, unexpected maintenance and all the other costs that go with home ownership? If you can't afford to save, how will these costs be covered? Affordability goes far beyond making the mortgage payment each month.

Osborne said the guarantee/ loans would be interest free for five years, implying interest will be payable after this time. Another cost that needs to be accounted for.

With the exception of a few, all this scheme does is offers the opportunity for more unmanageable debt.

This loan is interest free for five years. After that an annual "fee" of 1.75% will be payable, and this will be increased by RPI+1%. This will still be much cheaper than the cost of the actual mortgage which you have on the remaining portion.

biglugs

Thomas_Hardy wrote: »

Some (in the professions) will see large salary increases, in which case there is no harm in waiting to buy once they have a better salary. Equally many will be earning little more in five or ten years than they do now - not everyone has a career with a clear (or any) progression path.

Interesting that you assume all first time buyers are young - the average age is 30, so hardly someone straight out of university.

From where I'm sitting 30 IS young! And this scheme doesn't just apply to first time buyers - there are an awful lot of people stuck in their first home who can't move to a bigger home because of the low level of equity in their current house.

biglugs

claret_mike wrote: »

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%)?

I read this as 1.75%*(1+RPI+1%) - so if RPI was 3% then in Year 7 the fee would be 1.75%*(1+.03+.01) = 1.82%, then:
Year 8 = 1.89%
Year 9 = 1.97%
Year 10 = 2.05% etc.

biglugs

BritishBulldog wrote: »

Just another thought on this whole thing. The better half and i have 2 properties in mind that we were looking at to buy, and would have been putting in a bid probably next week, both with 10% deposits, and were looking at 5 year fixed rate, fee free mortgage from HSBC. Effectively we could still go ahead, but simply getting a bog standard non fixed rate, which is cheaper in the short term, then come next year, we could remortgage using Georgie-boys 20% loan, move onto a 5 year fixed and be paying 20% less on the mortgage. Does this sound right or am i missing something really obvious??

Quite likely the mortgage lenders using this scheme will only make it available on house move deals, rather than remortgages.