Govt to announce Stamp Duty Cut for first time buyers

Rich2808

All every stamp duty cut has ever done is raise prices - as Osborne's reforms and previous FTB schemes showed. Buy to let landlords also paid more for their properties in reverse just before the second property higher charge came in as they rushed in to meet the deadline,

You save £5k upfront but now you can borrow possibly up to £20k more over 25 years plus interest by leveraging that £5k as a higher deposit, A £5k saving now to pay £30k more over time - yes very helpful!

It's good news for sellers - not FTBs.

GreatApe

mrginge wrote: »

The problem with your ‘loan’ is that even less people will be paying it back than the students (isn’t it about 70% that will currently never get repaid?).
Calling a (effective) sunk cost a loan might fool a few people but I think most of us realise that it’s just one big can-kicking fudge.

My personal view is that student loans should be linked to CPI and not have a cut off date and any remaining loans should come out of peoples estates before they are distributed. If that were the case a lot more of the loans would be repaid. Perhaps as much as 80%+

I am not sure why society sees it fit to help photography students spend 4 years at university with a cost of £80,000 yet does not see it fit to give a similar size loan for housing. In what way is the country better off in putting an 18 year old into a 4 year photography course at £9k tuition + £11k maintiance loans each year?

Why not give a young person the same £80k to buy a house on the same loan terms as the photography students???

Let a pair of FTBs spend their £160k FTB loan on housing rather than useless courses. With the useless course its a consumption that in the majority of cases provides zero value. With the housing purchase its at least a investment which saves the young person > 5% of £80k each year for life.

Make the loans usable for an education or a home or a pension. Make the loans interest of CPI and have a repayment on the same terms as the current student loans. So something like 9% of earnings above £21k. House non saleable for 10 years and only saleable if purchasing another house.


The result would be far fewer university students (good) and far more owners sooner (good) and a much lower pressure on the social stock (good) and far fewer government payments on benefits (housing benefits would go lower and lower) and far fewer payments in pension credits as there would be fewer non owners when they retire.

Its really a good idea we spend £30 billion or so on an education which mostly does not help producitivty or the kids obtain better work. Put it into housing or pensions would be a massive improvement in every way. It would also lower the gap between the rich and the poor

GreatApe

mrginge wrote: »

The problem with your ‘loan’ is that even less people will be paying it back than the students (isn’t it about 70% that will currently never get repaid?).
Calling a (effective) sunk cost a loan might fool a few people but I think most of us realise that it’s just one big can-kicking fudge.

Well with the £80k on an education its consumption and wasted mostly
With the house you could put a charge on it so that the £30k + CPI is paid back on sale or death.

The house or pension also lowers future benefit payments it also greatly reduces the stress on social housing.

If anything I think my original £30k per person is too low. It should be £60k per person maybe even uoto £80k per person.
While tuition is £9k a year for a 3-4 year course = £27-36k there is also £10+ plus in maintiance loans. So a 3 year student walks out with £60k debt and a four year student with £80k debt.

£60k loan to every 18 year old at CPI interest to be paid back at 10% earnings over £25k.
Any outstanding loan to be repaid on sale of house (excludes sale and purchase so moving home is OK) or repaid on death via the persons estate.

Benefits of thus include

Lower housing benefit payments
Lower pensioner credits
Less stress on the social stock (as fewer younger people need social housing)
Young people save a lot on rent payments
Gives young people capital and lowers the wealth gap
Gives young people more income (low or zero mortgage payments vs high private rent payments)
Potentially less in tax credits
Potentially lower crime and more responsible young people

Many benefits.

Of course the counter argument is that thus will just push house prices up. But that is not likely because while it will add to the demand of buying houses for owner occupation it will lower demand on housing bought by landlords to rent out. If the young adults on average live at 2.35 persons per property it doesn't add to the overall demand it just shifts it from landlords to owners. Also higher prices for an investment good is not all that bad if the result is more investment in building homes.

Others object to it on the terms that they don't want to hand out young people government help. But we already do this in the form of a LISA we give them £1k each year between age 18-50 so that is uoto a £32k gift while my proposal is a loan. You can do away with the LISA and help to buy etc and save money there too.

GreatApe

Rich2808 wrote: »

All every stamp duty cut has ever done is raise prices - as Osborne's reforms and previous FTB schemes showed. Buy to let landlords also paid more for their properties in reverse just before the second property higher charge came in as they rushed in to meet the deadline,

You save £5k upfront but now you can borrow possibly up to £20k more over 25 years plus interest by leveraging that £5k as a higher deposit, A £5k saving now to pay £30k more over time - yes very helpful!

It's good news for sellers - not FTBs.

The market was increasing anyway it would have gone up with or without the previous stamp duty cuts. This is the problem with a hundred variable model like the economy you can't look at just one variable and make a conclusion.

Also the UK housing market is many markets the birth for instance has been flat for a decade

NaughtiusMaximus

Rich2808 wrote: »

It's good news for sellers - not FTBs.

Except it's not, the big myth we've been sold for decades is rising house prices are a good thing for home owners. Most sellers are also buyers, if prices are rising at the bottom of the market they're invariable also rising higher up so neither party benefits. The only people who benefit from rising house prices are 'investors', housing developers and anyone who chooses to sell up and emigrate.

GreatApe

£60k per person student housing loans at CPI interest and paid off at 10% of income above say £16k income (£16k is about what a full time min wage person earns)

CPI is likely to be 2% long term or that is the BOE target.

A young couple could buy a 3 bedroom home in Birmingham using just their student housing loans. Their house would be free no mortgage no rent just loan repayments at 10% of income above £16k

The loan can be portable.
Any remaining loan is paid off on sale of home and or death.
As such almost 100% of loans would be repaid

Sum can be used to buy an education or a house.
Many people who would have gone to university would instead buy a house that is a good thing as over 2/3rds of university students are wasting their time and the countries resources.

Should be backdated to be available for anyone age 30 or under who didn't go to university.
Excludes anyone who already owns property

Many benefits few downsides.

I would also potentially accept a higher second home stamp duty to further discourage second hone ownership if this idea resulted in higher house prices vs what they would have been. So we could go from +3% surcharge to +6% which would further lower BTL demand.

economic

GreatApe wrote: »

£60k per person student housing loans at CPI interest and paid off at 10% of income above say £16k income (£16k is about what a full time min wage person earns)

CPI is likely to be 2% long term or that is the BOE target.

A young couple could buy a 3 bedroom home in Birmingham using just their student housing loans. Their house would be free no mortgage no rent just loan repayments at 10% of income above £16k

The loan can be portable.
Any remaining loan is paid off on sale of home and or death.
As such almost 100% of loans would be repaid

Sum can be used to buy an education or a house.
Many people who would have gone to university would instead buy a house that is a good thing as over 2/3rds of university students are wasting their time and the countries resources.

Should be backdated to be available for anyone age 30 or under who didn't go to university.
Excludes anyone who already owns property

Many benefits few downsides.

I would also potentially accept a higher second home stamp duty to further discourage second hone ownership if this idea resulted in higher house prices vs what they would have been. So we could go from +3% surcharge to +6% which would further lower BTL demand.

i think this is a great idea greatape. at first i wasn't so sure but reading your comments now make me think you are onto something here.

i have always thought most degrees are an utter waste of time and resources. this solves that problem. the current system really incentivizes students to be forced to go uni.

GreatApe

economic wrote: »

i think this is a great idea greatape. at first i wasn't so sure but reading your comments now make me think you are onto something here.

i have always thought most degrees are an utter waste of time and resources. this solves that problem. the current system really incentivizes students to be forced to go uni.

The #1 problem with university education and funding is that there is no alternative. 17 year olds are told we will give you £80k and you don't need to pay it back so lots of 17 years olds think well why not I can go do a dance degree for 4 years and in no worse off!

Oddly it means the leas capable you are the better off you would be in going to university.
A smart kid will pay it all back a dim kid won't pay a penny back.
The kid doing mathematics will be forced to pay it all back the kid doing photography won't pay a penny back.

It would be political suicide politically to reduce university numbers so my alternative is to just give the kids choice. Let the kids use the loan for a higher education or for a house. With choice two thirds of uni students would find more value in owning the house and 100% of the house koans would be repaid while perhaps only 50% of the university loans will be repaid.

Many other advantages too. Overall it would save the state and public money
£80k to do a photography is a total wage it would be the same as paying someone £40k to dig a hole and someone else £40k to fill that hole back up. Might as well give the kid £80k to buy a house that will at least have a return of £4k annually. It turns consumption into investment.

It also takes young dim socialists and makes them house owners with responsibility with work and paying their own taxes so fewer lefties. Also two thirds of units would likely close or shrink so less indoctrination and those unemployed photography professors will need to get reap jobs.

I'm thinking of doing a thread on this topic to get more views.
If I and the forum members can't think up negatives that outweigh the positives I night book an appointment with my MP and out the idea forward.

It really should be a conservative goldmine.
The left will hate it as it gives the young capital and responsibility.

GreatApe

It would also reduce the demand for social housing. If say 90% of young adults are buying their own homes then that means very few young adults would need social housing. That would free up social housing for older people. Over a longer period there would be more social housing than demand for it so the councils and HA will start selling off the empty ones. Thus already happens g in Telford one of the cheapest towns in england social housing exceeds demand so over the last 5 years the council has been selling some off.

It would also give the poor a huge boost in wealth.
While is only a loan that will be fully repaid it is a loan at just CPI interest while the kids would be paying closer to 6% rent. The difference is theirs to improve their lot in life.

It also rebalances generational wealth a lot. In effect the young couple get £120k in their early 20s and pay it off in their 80s when they die (or of course for those who are paid over £28k they would be paying down the debt in real term for each year they earn above that)

It would also help the benefits situation.
Just yesterday I sat down next to two middle age women. One was advising the other to reduce her hours to 16h a week and that any list income would more or less be coveted by increased benefits (true but sad) and the other was saying she had to work 30h to get the tax credits etc. It seems so depressing to listen to . if young kids get housing via this student loans then their marginal 'tax' rates would be 90% plus as it is for renters (both social and private). So it would reduce this artificial working for tax credits problem we have.

Windofchange

GreatApe wrote: »

I'm thinking of doing a thread on this topic to get more views.

Please do, it'll be hilarious.

1) How does an 18 year old service a mortgage? With his pocket money?
1b) How does an 18 year old get a mortgage? Are you going to force banks to lend them whatever regardless of risk?
2) What if, shock horror I know in your world, house prices go down? Where is your return on investment for the taxpayer then? Negative equity is very real in lots of parts of the country
3) As per when you previously brought this up, where are you going to find £21,000,000,000 annually to fund this? Ontop of this, where are you going to find the money to backdate this for everyone under 30? £100 billion plus bill to start off with?
4) How are you going to subsidise 18 year olds to get a 400 grand mortgage for a starter property in London / S.E, or are you going to demand they all move up north?
5) In relation to the above, what impact will this demand have upon society in the south?
6) Where are you going to find some 700,000 new houses / studios each year for these people to buy?
7) How are you going to deal with the political unrest of giving a huge amount of money to one part of the population whilst cutting welfare, pensions, social care, NHS etc etc?
8) At what age can someone sell their house? Who takes the profit if there is any?
8b) Given teenagers / early 20 somethings are notoriously socially mobile, what when they need to move to take a job? Go travelling? If you have set an age that they can't sell before, how do you mitigate this? Allow them to rent it out? How do you ensure they get a BTL mortgage? How do you ensure no empty periods leaving our travelling 18 year old with a £1000 mortgage bill they can't pay that month?
9) What happens to the UK education level if everyone stops going to uni? Even easy degrees (and I will agree with you on one point here that there are some pointless degrees) teach some form of reasoning, dissertation writing, critical appraisal etc.
10) What impact does closing all but 10 universities say have on employment in areas? Lecturers? Cleaners? Entertainment and nightlife? Admin staff? Student buy to let? How many 100's of thousands of people do you think would be out of a job without a large student population? What impact would that then have on the economy?

That has taken about 10 minutes. I'm sure we can add more in your newly created thread.