Help to Buy may have to be scrapped, Vince Cable warns

wotsthat

Graham_Devon wrote: »

You think so?

I'm not so sure. If it was already in place and labour took over, removing it would be very difficult without damaging the market. It could take several years to wind it down.

What's winding down got to do with anything? Tomorrow the government could stop new entrants to the scheme. That doesn't mean the people who already participated would suddenly have to repay their loans. Why would that happen?

If Labour get in then Help To Buy will be scrapped and replaced with something else with a different name but remarkably similar in design.

Graham_Devon

wotsthat wrote: »

If Labour get in then Help To Buy will be scrapped and replaced with something else with a different name but remarkably similar in design.

I agree with this. But that's not the idea you put forward previously. Scrapping by a name change is very different to totally scrapping the scheme.

wotsthat

Graham_Devon wrote: »

I agree with this. But that's not the idea you put forward previously. Scrapping by a name change is very different to totally scrapping the scheme.

It could be scrapped. I don't think there would be the fallout you expect but recent history suggests that prices might fall and so would transactions as sellers sit tight and buyers struggle to raise finance.

However, until the economy is more robust I can't envisage an absence of one scheme or another. The economy needs a boost, people want to buy houses and there's a shortage. It's an obvious area for stimulus/ tinkering/ politicking.

Labour are talking about building 200,000 houses - you just know that's going to involve taxpayer funding for the building and rents. At least with Help To Buy taxpayer funds are repayable.

Graham_Devon

wotsthat wrote: »

It could be scrapped. I don't think there would be the fallout you expect but recent history suggests that prices might fall and so would transactions as sellers sit tight and buyers struggle to raise finance.

However, until the economy is more robust I can't envisage an absence of one scheme or another. The economy needs a boost, people want to buy houses and there's a shortage. It's an obvious area for stimulus/ tinkering/ politicking.

Labour are talking about building 200,000 houses - you just know that's going to involve taxpayer funding for the building and rents. At least with Help To Buy taxpayer funds are repayable.

IF the scheme is say a year or two into it's term, pulling it suddenly would have the same sort of consequences as the financial crisis did to the housing market, IMHO.

Not only would the government be pulling it's major support, and therefore house prices would fall, banks would too, react to the falling prices and reign in lending again.

All IMHO. History suggests there is no easy way out of such a scenario.

That is my fear. Help to buy part 1 isn't the issue really. It's help to buy part 2, which is all too close to comfort to what the US did that's the issue.

There are plenty of warnings, I'm not sure if it will go ahead as proposed as yet. But I can't remember a policy with quite as many warnings to any government in the recent past, bar the Iraq war....and look where that ended up.

wotsthat

Graham_Devon wrote: »

IF the scheme is say a year or two into it's term, pulling it suddenly would have the same sort of consequences as the financial crisis did to the housing market, IMHO.

I'm sorry but it's just not credible to equate the ending of a scheme that's helped a few thousand people to the effects of a global financial crisis.

The scheme ending would clearly have an effect but the more robust the economy the less the effect.

People buying via the scheme aren't in as good a position as someone with a large deposit and ready finance. The latter buyer will be better able to negotiate on price with the builder. There comes a point where it's better to forgo a 20% 'free' equity loan in exchange for a better negotiating position and flexibility.

The better the economy the more people will choose to avoid Help To Buy. It could well fade away of its own accord.

I've been doing the sums with a family member who has a c20% deposit and access to a mortgage and wondering why they don't just put down 5% and deposit the rest. As much as we're led to believe new houses aren't selling like hot cakes and for such a buyer there are some deals to be had.

Graham_Devon

wotsthat wrote: »

I'm sorry but it's just not credible to equate the ending of a scheme that's helped a few thousand people to the effects of a global financial crisis.

Which is why I didn't do that. I said specifically to the housing market. As in the effects to the mortgage market.

Pulling this a year or two in on the fly would see house prices fall as demand falls.

Due to the policies inflatory effect on house prices, house prices would have to realign to values without that support again, which would see prices fall.

That would see lending fall as banks protect themselves.

Unless of course we've entered a whole new economic and banking framework.

wotsthat

Graham_Devon wrote: »

Which is why I didn't do that. I said specifically to the housing market. As in the effects to the mortgage market.

Which is what I thought you meant. Still not credible to equate the effects of the GFC on the UK housing market with the effects of withdrawing Help To Buy.

Think about it. How many people have been helped so far and multiply by a 20% equity loan - guessing - 10,000 x £35k = £350m. Already it's looking tiny in a GFC context.

Add some more context. Why not compare to the £600m being spent on Nick Cleggs' free school meals? Frankly the GFC context now just looks silly.

I can see why you've got a bee in your bonnet about Help To Buy. You've grossly over-estimated its stimulus effect. You think it's like economic rocket fuel - it's not.

Graham_Devon

wotsthat wrote: »

Which is what I thought you meant. Still not credible to equate the effects of the GFC on the UK housing market with the effects of withdrawing Help To Buy.

Think about it. How many people have been helped so far and multiply by a 20% equity loan - guessing - 10,000 x £35k = £350m. Already it's looking tiny in a GFC context.

Add some more context. Why not compare to the £600m being spent on Nick Cleggs' free school meals? Frankly the GFC context now just looks silly.

I can see why you've got a bee in your bonnet about Help To Buy. You've grossly over-estimated its stimulus effect. You think it's like economic rocket fuel - it's not.

It's more about the sentiment that the amount of people actually making use of it.

I'd have thought you'd understand this, considering you have lectured me on sentiment before now.

It's having an effect NOW and precisely £0 has been lent under HTB2.

Let's not pretend that the only effect it has is the absolute amount of money put in or the number of people making use of it.

wotsthat

Graham_Devon wrote: »

It's more about the sentiment that the amount of people actually making use of it.

I'd have thought you'd understand this, considering you have lectured me on sentiment before now.

Sentiment drives markets but not to the extent that a £350m scheme suddenly transposes into 5% onto everyone's house value in a year. That's just not believable.

There are bigger forces at play. An improving economy being one.

Graham_Devon

wotsthat wrote: »

Sentiment drives markets but not to the extent that a £350m scheme suddenly transposes into 5% onto everyone's house value in a year. That's just not believable.

There are bigger forces at play. An improving economy being one.

It's just a tad more than £350m....