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

shortchanged_2

biglugs wrote: »

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.

How do you work those figures out?

I would have thought it meant in year 7 going on your figure of RPI at 3% it would be 1.75 + 3 +1 = 5.75%

I don't know how you are working your figures out.

biglugs

For those people who want more details the Treasury website has a good page:

http://www.hm-treasury.gov.uk/10012.htm

As well as a PDF document which summarises how the two schemes will work:

http://www.hm-treasury.gov.uk/d/budget2013_help_to_buy_infographic.pdf

It's worth spending some time looking at this. The second of these schemes (Mortgage Guarantee) is designed to help people get a mortgage at higher LTVs than they can at present.

It's a shame that so many posters on here are following the "if you can't afford the 20% deposit, don't buy it..." line.

For many people they cannot raise this level of deposit because the monthly rent they are paying is so high it is sucking their cash away. It is actually better financial sense for many of these to buy a house (especially on a longer period fixed rate) - and this scheme should help them to do that.

Arguing about whether house prices are too high, or that BTL landlords have pushed up house prices and should be targeted, is not much consolation to those who are stuck in over-priced rented accommodation.

Let_Us_See

BritishBulldog wrote: »

, 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??

I hate to say it BritishBulldog but you are barking up the wrong tree. According to information released the scheme will only apply to purchases.

Audiman7

shortchanged wrote: »

How do you work those figures out?

I would have thought it meant in year 7 going on your figure of RPI at 3% it would be 1.75 + 3 +1 = 5.75%

I don't know how you are working your figures out.

If RPI is 3% + 1% = 4%.

4% of 1.75% is 0.07%

1.75% + 0.07% = 1.82%

shortchanged_2

Audiman7 wrote: »

If RPI is 3% + 1% = 4%.

4% of 1.75% is 0.07%

1.75% + 0.07% = 1.82%

OK I see what your saying, but are you sure that's how its working not the way I've calculated it.

Can you show me where you got your method from?

biglugs

shortchanged wrote: »

OK I see what your saying, but are you sure that's how its working not the way I've calculated it.

Can you show me where you got your method from?

I can't show you explicitly because it isn't clearly shown in the published sources.

The Treasury website says
"From year six a fee of 1.75% is payable on the equity loan, which rises annually by RPI inflation plus 1%."

From this I take it that the fee rises annually by RPI+1%, i.e. the 1.75% fee is increased each year by RPI+1% - so if RPI is 3% the fee would be increased by 4% each year.

Audiman7

shortchanged wrote: »

OK I see what your saying, but are you sure that's how its working not the way I've calculated it.

Can you show me where you got your method from?

http://www.hm-treasury.gov.uk/10012.htm
" From year six a fee of 1.75% is payable on the equity loan, which rises annually by RPI inflation plus 1 %. "

In year 6 you will pay an annual fee of 1.75%

That 1.75% will rise annually by RPI inflation plus 1 %.

So if for example RPI is 3% plus the 1% equal 4%.

So every year that 1.75% will rise by 4%.

4% of 1.75% is 0.07% which equals 1.82%

Then next year if RPI is still 3% plus the 1% it would be 4% of 1.82% which equals 0.0728%

and so on and so on.

shortchanged_2

biglugs wrote: »

I can't show you explicitly because it isn't clearly shown in the published sources.

The Treasury website says
"From year six a fee of 1.75% is payable on the equity loan, which rises annually by RPI inflation plus 1%."

From this I take it that the fee rises annually by RPI+1%, i.e. the 1.75% fee is increased each year by RPI+1% - so if RPI is 3% the fee would be increased by 4% each year.

So is there anyone who can clarify it on here, because there is quite a significant difference between the two workings out.

Audiman7

shortchanged wrote: »

So is there anyone who can clarify it on here, because there is quite a significant difference between the two workings out.

If you go to page 13 of this document it should clarify it for you.

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

shortchanged_2

Audiman7 wrote: »

If you go to page 13 of this document it should clarify it for you.

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

Sorry it's not bringing anything up on my computer apart from a 1 page glossy flow chart type thingy.