Really depressed by the news about Help to Buy...

qwert_yuiop

Today's London market reminds me so much of Northern Ireland's in 2006 - completely mad.
Now I know London is a very different place, but once no one is left who can afford to buy at exorbitant prices, it all changes very quickly. Belfast's prices are now down by 53% since 2007.
I'd sell to rent if I was living in London now.

Prepared to eat my hat of course.

HAMISH_MCTAVISH

MaxTheCat wrote: »

No sorry you're wrong the second phase is aimed at existing properties so there is literally no reason that more housing should be built.

Absolutely wrong.

Many buyers of new builds have not historically been FTB-s, but rather 2nd steppers, so enabling more FTB-s to buy their existing properties enables them to then go out and buy new builds and unfreezes the market.

Leading to more housing being built.

Also government interference in the market which is not dysfunctional at all (the banks on their own have decided houses are too expensive hence large deposits required to offset their risk)

Not just wrong.

Spectacularly wrong.

Banks have not "decided houses are too expensive" at all.

Banks have been forced to hold back 6 times as much capital for a 95% LTV mortgage than for a 75% LTV mortgage under new bank capitalisation rules to comply with BASEL 3 regulations.

The unintended consequence of which has been to virtually wipe out FTB lending in this country.

What HTB 2 does is allow the banks to purchase a government guaranteed insurance to cover this risk instead of holding back more capital, which frees up over 100 Billion in new funding to lend to FTB-s.

By the way before you think I'm an HPCer

The fact that you are even familiar enough with the such an obscure term for a tiny, extremist group of people to use it, pretty much guarantees that's exactly what you are.

harrys_dad

HAMISH_MCTAVISH wrote: »

The percentage of income required to buy a house has rarely been lower.

Therefore, houses are cheap by historical standards.

Not true. Look at the Historical house price data downloadable on this link http://www.talkford.com/topic/199806-mk4-fuel-filler-flap-jammed/ and you will find that house price/earnings ratio is still well above what it has been previously, right back to the last big peak at the end of 1988.

What is keeping actual payments down are low mortgage rates, which are a direct consequence of the poor economic situation. Once the economy improves interest rates are bound to increase very significantly. Those people borrowing 5 times earnings will be in real trouble then.

The reason house prices did not decline very much here despite the economic crash is that the supply/demand equation is out of balance. We are building fewer houses each year at the moment than since the 1920s. In the USA house prices declined so much because they have 4 million surplus houses. Here we have a huge shortfall and are unable to meet demand.

The money going into HelptoBuy would be much better spent building more social housing, which would also lower private rents, and significantly reduce the housing benefit bill.

HAMISH_MCTAVISH

harrys_dad wrote: »

house price/earnings ratio is still well above what it has been previously, .

As it should be, with a shortage of housing, and more couples tending to buy them than singles.

But the percentage of income required to buy a house has still rarely been lower.

harrys_dad

HAMISH_MCTAVISH wrote: »

But the percentage of income required to buy a house has still rarely been lower.

A point which I dealt with above, the reason being historically low interest rates which will increase when the economy improves, and put 5 times income borrowers in terrible trouble. You chose to ignore this part of my post in your role as chief cheerleader for rising house prices.

dodger1

1865ST wrote: »

I was hoping to buy in the first half of next year but I dread to think what will happen with this scheme. Just feels like my luck really! I thought the tories are all about helping people who save and work hard?

You can work hard but still not have enough to save so yes the Tories are helping those people on lower wages in this case.

HAMISH_MCTAVISH

harrys_dad wrote: »

the reason being historically low interest rates which will increase when the economy improves, and put 5 times income borrowers in terrible trouble.

Except of course, that's pretty much complete nonsense.

If you think that will happen, then you have to believe the following......

- That the current record high margins above both base rates and bank funding costs will stay that high when base rates start to rise

- That the increase in lending which will drive economic recovery such that base rates can rise won't also drive competition amongst lenders to reduce those margins

-And also that base and mortgage rates will rise to levels where significant numbers of "borrowers will be in terrible trouble" without having already destroyed sufficient demand within the economy to cool inflationary pressures.

It's so unlikely in fact, that you'd have to be economically illiterate to believe it's even remotely possible.

You chose to ignore this part of my post in your role as chief cheerleader for rising house prices.

Sorry....

I had no idea you were actually being serious.:o

Here's what the governor of the BOE had to say about those concerns.....

"Along with the path of an increase in the bank rate -- which inevitably will come from where we are now back to more normal levels -- you would expect that to be accompanied by a process in which the spread between the bank rate and the rates banks charge would undoubtedly narrow."
~ Sir Mervyn King

So base rates go up, bank margins come down, mortgage rates stay in the same region they've been for the last 15 years or so, somewhere around 5%, instead of the average today of 3.5%

Which certainly wouldn't be disastrous for people with 5 x income mortgages.

harrys_dad

No, he is not the current Governor of the Bank of England, he is the previous one, who failed to spot and act on any signs at all of the credit crunch. I may be about as economically illiterate as him.

witchy1066

"Along with the path of an increase in the bank rate -- which inevitably will come from where we are now back to more normal levels -- you would expect that to be accompanied by a process in which the spread between the bank rate and the rates banks charge would undoubtedly narrow."
~ Sir Mervyn King
[/QUOTE]

Mervyn King stood down earlier this year , that comment is as out of date as some of your other posts

if you are going to be ranting on about something you obviously feel strongly about at least get the facts right ,
also stop only quoting the bits that suit ,
we can all copy,cut and paste

snapshots do not give the full picture

HAMISH_MCTAVISH

Mervyn King stood down earlier this year ,

And Carney, if anything, has been even more dovish than King was.

We all see which way this is heading.;)

if you are going to be ranting on about something you obviously feel strongly about at least get the facts right ,
also stop only quoting the bits that suit ,
we can all copy,cut and paste

snapshots do not give the full picture

I quote the relevant bits.

And my facts are very much right.

Whereas some others around here try relentlessly to muddy the waters with all sorts of vague and unfounded scare stories in a shameless attempt to scare people for no reason.

Prices are heading up, the economy is recovering, unemployment is falling, and even wages are rising.