Will they ever learn?

bugslet

JencParker wrote: »

I'm new to the forums, but isn't this board called

Debate - House prices and the economy ?

When radiantsoul suggested it be on the debate board , it was on the mortgage board and subsequently moved here.

demontfort

monkeysrevenge wrote: »

I'd much rather the government offered loans to individuals who want to build a life and provide security for themselves and their families, than give handouts to lazy scroungers who abuse the welfare system, can't be bothered to make any positive contribution in society and rely on welfare payments to fund drug habits, petty crime and pro-create on an industrial scale.

I'd rather they didn't offer to either. Putting aside questions of people on benefits which is completely irrelevant, it's not the government job to subsidise people's lifestyles. If you want to buy a house you stump up the cash from your own pocket not from mine and other taxpayers. Then yourself and the bank can jointly bear the risk.

Here's an example Mr X buys a £250k newbuild house with a 5% deposit then gets a 20% £50k, five year interest free loan which otherwise would be priced at 5%. Straight off that's equivalent to a £12.5k tax free handout.

Then factor in the 2% drop in interest rates over 5 years on the £187.5k mortgage which the bank offers in return for the government taking the 20% credit risk.That's about another £15k freebie for the buyer.

All in all you are giving the buyer a £27k tax free bung over 5 years, which is well over one years average net salary. In these time of austerity with record national debt, government cutbacks, food banks and high unemployment if you think that's fair then you are completely crackers or completely selfish. They are just creating a whole new class of Help to Buy scroungers.

grizzly1911

Plus the contingent liability cost.

Conrad

leveller2911 wrote: »

Says a man who was a huge fan of "Liar Loans" and openly admitted to it on this website or are there 2 mortgage advisors called Conrad?.

You encouraged people to "massage" their earnings with regards to income multiples when applying for mortgages.

Historically speaking your part of the problem Conrad, mortgage advisors like you advising buyers to lie about income.

Did you lie about your income to get your own mortgage Conrad?

You have a very short memory .

Self cert loan books have very low delinquency rates, lower than standard full status books.
Probably the reason for this was the higher deposits required.

As to liar loans, sure you have a point, but Jimmy Carr is an example (albeit an extreme one) of the sort of person that required this. Millions of people had a legitimate need.

For example an agency nurse would struggle to get a lender to take all of her income into account (often from 2 or more agencies) so she simply stated what SHE felt was a reasonable sum of her true income.

Earnings split between spouses and after allowing for all sorts of legitimate expenses and things like Directors loan accounts mean a persons true spending npower is not reflected in a set of tax returns.

Does this make them liars?

monkeysrevenge

demontfort wrote: »

I'd rather they didn't offer to either. Putting aside questions of people on benefits which is completely irrelevant, it's not the government job to subsidise people's lifestyles. If you want to buy a house you stump up the cash from your own pocket not from mine and other taxpayers. Then yourself and the bank can jointly bear the risk.

Here's an example Mr X buys a £250k newbuild house with a 5% deposit then gets a 20% £50k, five year interest free loan which otherwise would be priced at 5%. Straight off that's equivalent to a £12.5k tax free handout.

Then factor in the 2% drop in interest rates over 5 years on the £187.5k mortgage which the bank offers in return for the government taking the 20% credit risk.That's about another £15k freebie for the buyer.

All in all you are giving the buyer a £27k tax free bung over 5 years, which is well over one years average net salary. In these time of austerity with record national debt, government cutbacks, food banks and high unemployment if you think that's fair then you are completely crackers or completely selfish. They are just creating a whole new class of Help to Buy scroungers.

Isn't this "tax free bung" the underlying reason why the HTB scheme is actually there though, to assist in buying your own home through offering lower interest repayments?

You've got to think of it as a loss-leader - giving a tax/interest break to someone investing in their own home, and in theory later down the line they have more disposable income to purchase more goods (which you pay VAT on), a bigger house (which you pay stamp duty on), being able to provide better opportunities and standard of living for their children etc etc...

Yes, if you take the short term view the figures look high, and what I've said is only a theory on what might happen, but at least the scheme is there to give people a chance of owning their own home, and not be subjected to a lifetime of paying dead money in rent.

michaels

namiku wrote: »

I don't know in which Universe you spend £10 a day on food but yea sure.

Probably the same one where our family of 5 spend 450 a month on supermarket shopping which ncludes all food, toiletries, cleaning products etc.

Some people don't know what real life is for the majority of people in this country with an average household income of less than 30k.

demontfort

monkeysrevenge wrote: »

Isn't this "tax free bung" the underlying reason why the HTB scheme is actually there though, to assist in buying your own home through offering lower interest repayments?

You've got to think of it as a loss-leader - giving a tax/interest break to someone investing in their own home, and in theory later down the line they have more disposable income to purchase more goods (which you pay VAT on), a bigger house (which you pay stamp duty on), being able to provide better opportunities and standard of living for their children etc etc...

Yes, if you take the short term view the figures look high, and what I've said is only a theory on what might happen, but at least the scheme is there to give people a chance of owning their own home, and not be subjected to a lifetime of paying dead money in rent.

Completely disagree HTB is a very short term and foolish policy and it really does beggar belief that any government could implement this scheme in light of recent events. It's bad for the following reasons:

HTB is bad for the housing market as it pushes up prices which are already inflated encouraging speculators just as happened prior to the US sub prime crisis. Speculative borrowing in residential real estate was cited as a contributing factor to the subprime mortgage crisis.

HTB is bad for banks it encourage them to lend to people who are high credit risk with the loan secured against an overpriced asset. Again we saw that was a key cause of the US sub prime crisis.

HTB is bad for the Government with the government taking on both credit risk on the loans and taking a loss by offering them interest free. Again we saw the negative effects of government interference through Fannie Mae and Freddie Mac during the US sub prime crisis.

HTB is bad for FTBs and Borrowers as it pushes up house prices and encourages them to borrow what they can't afford by effectively offering teaser rate loans. Again this was a cause of the sub prime crisis.

Well at least we agree on one thing HTB borrowers are scroungers. :rotfl::rotfl::rotfl::rotfl:

monkeysrevenge

demontfort wrote: »

Completley disagree HTB is a very short term and foolish policy and it really does beggar belief that any government could implement this scheme in light of recent events. It's bad for the following reasons:

HTB is bad for the housing market as it pushes up prices which are already inflated encouraging speculators just as happened prior to the US sub prime crisis. Speculative borrowing in residential real estate was cited as a contributing factor to the subprime mortgage crisis.

HTB is bad for banks it encourage them to lend to people who are high credit risk with the loan secured against an overpriced asset. Again we saw that was a key cause of the US sub prime crisis.

HTB is bad for the Government with the government taking on both credit risk on the loans and taking a loss by offering them interest free. Again we saw the negative effects of government interference through Fannie Mae and Freddie Mac during the US sub prime crisis.

HTB is bad for FTBs and Borrowers as it pushes up house prices and encourages them to borrow what they can't afford by effectively offering teaser rate loans. Again this was a cause of the sub prime crisis.

Well at least we agree one one thing HTB borrowers are scroungers. :rotfl::rotfl::rotfl::rotfl:

As long as the scheme is run properly and they assess affordibility correctly, I can't see where the major risk is any more. Banks are at least asking for some capital up front which they weren't always doing before the housing crash a few years ago. Plus the fact the HTB scheme is quite a small proportion of new mortgages (going on the fact that there's not a single house eligible under this scheme within 10 miles of where I live) I think it's quite a low risk.

I wouldn't say HTB borrowers are scroungers (twisting my words, naughty ) but you never know what's coming - you might well be able to save up a £10k deposit - round here that's 10-15%(!!) - but then get hit by a massive car repair bill, hospital fees, redundancy, pay cut, etc... there goes a chunk of your savings and you're back to square one.

And you've got to remember, it wasn't just mortgage lending that led to the recession (and subsequently the housing market crash). Personal experience tells me that unsecured lending played a massive part - I applied for a credit card 7 years ago when I earned a measly £5200 per year on an apprenticeship, i gave honest details about my income and Halifax gave me a card with £6000 credit!!! :eek:

demontfort

You know what despite my 100% opposition to HTB I'm not opposed to giving FTBs some very limited assistance. Based on your local house prices I assume you're not in the South East and house prices round your way have probably taken a hit the last few years. So if the government wants to provide a very limited number of small (5% of property value), short term market rate loans to local FTBs on properties up to £100k I can't see the harm.

However HTB is a different kettle of fish. HTB1 is bad enough but HTB 2 really sticks in my gullet. A policy which loans up to 20% interest free on a £600k ...yes £600k purchase with no cap on your income and regardless of whether you already own your own house is grossly unfair and will distort the market and hurt the economy, UK government and personal finances in the long term.

In London, prices are already sky high and this will make it worse for FTBs. I have my own deposit which I have worked and saved hard to get but as an illustration my agreed purchase fell through last month as the vendor pulled out telling me he had decided to remarket the flat after HTB2 came in next year as he would get a better price.

grizzly1911

monkeysrevenge wrote: »

As long as the scheme is run properly and they assess affordibility correctly,

Putting together a deposit under your own steam as part of the evidence is a good demonstration of the ability to mange money, save which is a plus point on the credit worthiness scale.

I can't see where the major risk is any more. Banks are at least asking for some capital up front which they weren't always doing before the housing crash a few years ago.

That is more an indication of had low the mortgage market had sunk.

Plus the fact the HTB scheme is quite a small proportion of new mortgages (going on the fact that there's not a single house eligible under this scheme within 10 miles of where I live) I think it's quite a low risk.

Or more for the advantage of the builder than Joe Punter.

I wouldn't say HTB borrowers are scroungers (twisting my words, naughty ) but you never know what's coming - you might well be able to save up a £10k deposit - round here that's 10-15%(!!) - but then get hit by a massive car repair bill, hospital fees, redundancy, pay cut, etc... there goes a chunk of your savings and you're back to square one.

What happens if you have taken on this mortgage, heavily committed yourself, have little in the way of savings, possibly negative equity, interest rates are rising and that "unexpected" stuff happens?

And you've got to remember, it wasn't just mortgage lending that led to the recession (and subsequently the housing market crash). Personal experience tells me that unsecured lending played a massive part - I applied for a credit card 7 years ago when I earned a measly £5200 per year on an apprenticeship, i gave honest details about my income and Halifax gave me a card with £6000 credit!!! :eek:

You are right unsecured credit and it's ease of availability was and still is an issue for many. When interest rate rise I am sure people will start tapping that resource once more.