Help to Buy is not causing a housing bubble

mayonnaise

Intersting article based on Halifax data, debunking all the bubble myths linked to HTB. :beer:

The high level data shows some interesting numbers that might help correct concern from media reports suggesting Help to Buy is contributing to a growing housing bubble.

Let's have a look then.

Halifax’s first 1,000 mortgage approvals came from 5,000 applicants, so despite the guarantee from the government, and the strict application criteria for the guarantee, Halifax have a low acceptance rate. This indicates that the credit underwriting that they apply is of an even higher standard than their general mortgage book.

So not really 'easy' credit, is it?

Additionally, the average property value for their Help to Buy mortgage applications stood at £157,660 whereas the maximum size allowed under both the equity loan and the mortgage guarantee is £600,000. The fact that their average is substantially below the allowable size indicates that the scheme is being used for standard sized loans. Even the average amount lent to borrowers in greater London is only £280,000.

Right, that's the myth that HTB is creating a London/SE bubble also debunked.

Equally interesting is the geographical split of the loans: 80% of the applications were from borrowers outside London and the South East. Again this points towards increasing demand for credit across the UK market, and could help support prices across the country, many of which are still below their HPI peak. This in particular is good news

It sure is.

http://www.everyinvestor.co.uk/news/2014/02/12/viewpoint-help-buy-causing-housing-bubble-7382/

Thrugelmir

This indicates that the credit underwriting that they apply is of an even higher standard than their general mortgage book.

The point that many people totally over look. The days of Northern Rock and their lending policies are well past.

lindsaygalaxy

I live in the south east (not London) and the average 3 bed semi that in the summer was on for £250k are now on for £270 - pricing us out of the market as we no longer have the salary multiples. I will be keeping a close eye to see if these prices are paid, but my friend is an EA and he said most are going for the asking price within the week!

mayonnaise

lindsaygalaxy wrote: »

I live in the south east (not London) and the average 3 bed semi that in the summer was on for £250k are now on for £270 - pricing us out of the market as we no longer have the salary multiples. I will be keeping a close eye to see if these prices are paid, but my friend is an EA and he said most are going for the asking price within the week!

Have you looked into HTB?
270k properties require a deposit of only 13.5k

leveller2911

mayonnaise wrote: »

Have you looked into HTB?
270k properties require a deposit of only 13.5k

That a boy Mayo......."Pump it up".......;)



I don't think anyone has posted that the HTB schemes are causing a housing bubble but they are contributing to the rising HPI.

Theres a big difference between "causing" and "contributing towards"....

lindsaygalaxy

I have looked into it and I wouldn't mind so much but the cost of the increase in stamp duty makes me think it all isn't worth it! When 3 bed ex council semis that need modernising are going on for 269k it puts me off buying at all!

HAMISH_MCTAVISH

leveller2911 wrote: »

I don't think anyone has posted that the HTB schemes are causing a housing bubble but they are contributing to the rising HPI.

Well, in as much as the HTB schemes have restored more normal lending availability to the market and reduced the artificial state of mortgage rationing that existed for the last 5 years, then yes.

They will obviously restore effective demand to more normal levels, enabling people to buy houses, and thanks to the record low building of the last 5 years due to mortgage rationing prices will now rise faster than they otherwise would have done.

But we did try to warn the rather large contingent of housing bears who were cheering on that mortgage rationing that it was neither sustainable nor desirable to worsen the housing shortage like that, and it would eventually result in an even bigger boom than would otherwise be the case.

They didn't listen....:)

leveller2911

HAMISH_MCTAVISH wrote: »

.

But we did try to warn the rather large contingent of housing bears who were cheering on that mortgage rationing that it was neither sustainable nor desirable to worsen the housing shortage like that, and it would eventually result in an even bigger boom than would otherwise be the case.

They didn't listen....:)

Just out of interest Hamish can you post a link where you predicted the financial meltdown along with the massive QE that has helped keep mortgage rates at an all time low and in doing so stopped the crash and burn from happening.

In the defence of the "bears" I would just point out that in their defence I don't think any of them , me included or you for that matter predicted the massive QE that has taken place. So I don't think you can groin thrust all that much TBH.......

As far as I can see all thats been achieved is some can kicking .The problem hasn't been sloved its just been delayed. Just my opinion of coarse.....

CLAPTON

lindsaygalaxy wrote: »

I have looked into it and I wouldn't mind so much but the cost of the increase in stamp duty makes me think it all isn't worth it! When 3 bed ex council semis that need modernising are going on for 269k it puts me off buying at all!

depends upon the alternative

ukcarper

mayonnaise wrote: »

Have you looked into HTB?
270k properties require a deposit of only 13.5k

To buy a £250k house you would need a £12.5k deposit + £2.5k stamp duty and with 4x mortgage an income of £59375. At £270k you would need £13.5k deposit + £8.1k deposit and an income of £64125. So quite a jump in affordability.

moneyinmypocket

Excellent news for hard working families wanting to start building there nest egg