Will they ever learn?

demontfort

Reading through these mortgage posts is just depressing.

· Help to Buy

· 95% mortgages

· Builder Gifted Deposit

All of these tricks just to encourage people who aren’t ready for the financial commitment to take the plunge and buy a house. This is exactly the kind of stupidity that led to the sub prime crisis in the US and now barely 5 years later we’re repeating the same mistakes in the UK. We’re sleepwalking into disaster.

The only difference is this time it’s not the banks leading the charge (they’ve wised up after getting their fingers badly burned) it’s the UK government who are splashing cash about like confetti. So when this housing bubble does pop it will be the UK taxpayer on the hook.

[FONT=&quot]I have to say right now words fail me! :rotfl::rotfl::rotfl::rotfl:
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gazter

demontfort wrote: »

Reading through these mortgage posts is just depressing.

· Help to Buy

· 95% mortgages

· Builder Gifted Deposit

All of these tricks just to encourage people who aren’t ready for the financial commitment to take the plunge and buy a house. This is exactly the kind of stupidity that led to the sub prime crisis in the US and now barely 5 years later we’re repeating the same mistakes in the UK. We’re sleepwalking into disaster.

The only difference is this time it’s not the banks leading the charge (they’ve wised up after getting their fingers badly burned) it’s the UK government who are splashing cash about like confetti. So when this housing bubble does pop it will be the UK taxpayer on the hook.

[FONT=&quot]I have to say right now words fail me! :rotfl::rotfl::rotfl::rotfl:
[/FONT]

A very large percentage of tax payers money is wasted, both through capital and revenue. If it wasnt this they p*ssed up against the wall it would be something else.

demontfort

Yes but this is not only a waste of money it will cause long term damage to the UK economy, public finances, individuals finances and the banking system just to prop up the housing market a little longer.

It's the equivalent of a £5billion government advertising campaign to encourage people to start smoking.

It might seem great to get a 95% mortgage now to buy an overpriced shoebox. But with an ongoing recession and interest rates one day set to return to normal levels a lot of financially naive FTBs are playing with fire.

DunPin

demontfort wrote: »

It's the equivalent of a £5billion government advertising campaign to encourage people to start smoking.

In fairness with the rate of duty and tax on cigarettes, the campaign would more than pay for itself, hell the treasury might even make a profit (obviously after NHS costs)

lawriejones1

Obviously these initiatives exist to prop up the housing market by bringing in entrants at the bottom level. The risk for any Government will be a whole-scale crash in the housing market, I guess it's more likely to be a long-term stagnation. They are political moves as much as anything.

Any prudent financial advisor would speak to their clients about the risk of interest rates going up and how much this might impact their ability to pay the mortgage. And any buyer with access to the internet and a memory that extends beyond 5 years will be able to remember a time when interest rates weren't so low.

Perhaps the most worrying aspect in all of this is the lack of financial acumen amongst the population. These things aren't particularly complicated in themselves, but people seem to make a real mess of managing money...

amnblog

The reality is that the aspirations of people do not meet their incomes in many cases.

Forty years ago people could not buy what they could not afford.

Today many large corporations make enoromous profit convincing people to buy what they do not have the cash for. (From ipads to help to buy properties). Making that happen drives cash through the economy (admittedly borrowed cash) and gets Governments re-elected.

The property market is further complicated by the problems people who 'cannot afford to buy' have in getting decent social housing.

We are a million miles away from a Norweigian style attitude to debt and I for one can't see us getting back there.

ACG

In the main i do agree, although there are exceptions.

For instance - 95% mortgage for a couple who were renting and paying £750 in rent for a house for them and their 2 children. They could not save a deposit as they were spending so much in rent, they did not want to move to a worse area due to their kids and could not downsize.

95% mortgage, relatively low income multiple (less than 4) for a first time buyer - both in good stable jobs, she works around 30 hours a week and will return full time in about 18 months.

Had 95% mortgages not been around they would be in catch 22, but they managed to break the circle.

I dont think the government should be getting involved - i think banks/builders should be doing something between them to come up with "niche type" products that help the above situations.

But at the same time, a buoyant construction industry helps manufacturing - which in turn gets more people working and more tax receipts, the same with more builders, stamp duty and again more tax - financially speaking i dont think the government loses in the long run.

andy.m_2

With property prices as high as they are there is a gamble that there will be a downturn.
5% equity doesnt leave a lot left to cover price collapse and any fees to move/leave.

The negative equity trap is the big fear.

Of course this only applies to those looking to move/sell so make sure FTBs just buy a bit of future proofing and they could be ok

opinions4u

Short term fix to boost the housing market, encourage DIY spending and lift the economy.

Then the blue idiots get re-elected instead of the red idiots replacing them.

A longer term fix would have been to do nothing, encourage saving, thrift, larger deposit mortgage lending and only spending what you've got and have an economy that grows organically from there.

After a decade or so the people would be significantly better off. But political short termism is far more important. Isn't it?

Do B&Q still pay their taxes in France?

Radiantsoul

I think the debate board is probably a more appropriate place to post this sort of thing.

namiku

demontfort wrote: »

Reading through these mortgage posts is just depressing.

· Help to Buy

· 95% mortgages

· Builder Gifted Deposit

All of these tricks just to encourage people who aren’t ready for the financial commitment to take the plunge and buy a house. This is exactly the kind of stupidity that led to the sub prime crisis in the US and now barely 5 years later we’re repeating the same mistakes in the UK. We’re sleepwalking into disaster.

The only difference is this time it’s not the banks leading the charge (they’ve wised up after getting their fingers badly burned) it’s the UK government who are splashing cash about like confetti. So when this housing bubble does pop it will be the UK taxpayer on the hook.

[FONT=&quot]I have to say right now words fail me! :rotfl::rotfl::rotfl::rotfl:
[/FONT]

You're actually quite wrong.

A lot of people are ready to make a financial commitment but what they lack is capital which is not easy to come by in this day and age.

I will use my example to show you what I mean. Me an my wife have a joint income of £50k with no dependents. We have been renting for a few years and have been paying in the range of £700-£800 per month on rent alone. We live a very fulfilling and enjoyable life. We feel it is the right time to buy a house and start a family however we lack capital required for a deposit. Using he HTB scheme we would be putting down 5/10% deposit plus 20% from the government (interest free for 5 years), and need a mortgage of 75%. Upon calculations with our mortgage advisor the monthly repayments for our mortgage would be £735. This is £15 cheaper then our current rent payment. If we were to add a payment of around £60 after 5 years for the loan (we plan to save and pay 20% of it before the 5 years anyway) and taking into consideration the fact that we would have paid some of our mortgage in that time as well the repayment would not go over £800.

Do you not think it is better that we own a home and pay the mortgage on it rather then pay it for someone else by renting (not to forget extortionate letting agency fees etc)?