Government looks to sell HTB loan book

Graham_Devon

The government is, according to the FT, intending to sell off the HTB loan book to investors worth £7.4bn.

The treasury have stated that they will not provide a commentary on the sale of the loan book.

Could be an indication that HTB in it's current form is coming to an end. There are also concerns over 38% of those who took on these loans having the ability to pay back the loans as interest rates increase.

Good time to sell off then for the government? One thing they suggested that they would not do when concerns were raised when they first announced the scheme.

I wonder what this means to those with HTB loans? Could the terms change? Unlikely I would have thought - but then what's in such a high risk, low yield loan book for the investors if they can't change the terms of the loans?

Remortgaging however could be tricky, with Mortgage Strategy already reporting some are now stuck on the original mortgage with no where to re-mortgage and only 10 lenders willing to offer a re-mortgage package on a HTB loan. If the government sells off the loans, surely re-mortgaging will just get even harder for those on the HTB loan?

https://www.ft.com/content/7cd3a5e0-22ea-11e8-add1-0e8958b189ea

Jon_B_2

What the hell is high risk about these loans?

As it stands the £55k loan the government lent us would earn them £65k back at current values and we only bought 2 and half years ago.

I!!!8217;d invest in these loans in their current format.

Graham_Devon

Jon_B wrote: »

What the hell is high risk about these loans?

As it stands the £55k loan the government lent us would earn them £65k back at current values and we only bought 2 and half years ago.

I!!!8217;d invest in these loans in their current format.

The high risk is the size of the debt compared to the yield.

Other risk is house prices falling. If the house price falls, the HTB aspect also reduces (and thus, as the holder of the debt, so does the amount you will get back). So you have a moving loan book, both up and down. Plus risk of non payment.

High risk in my book, unless you can change the terms.

Realise I will get told everything is rosy, but anyone with a HTB loan, if the loan book is sold off, could find it quite difficult to re-mortgage. We've seen it over and over again with previous products. On the plus side, raises the stakes of a PPI style miss sale.

If it's such a good thing for the government - why sell it?

Jon_B_2

The HTB loan has 25 years to be repaid.

How have house prices held up over a 25 year period? Good growth, I!!!8217;m sure one would agree.

Of course house prices can fall short term, but the reality is that they continue to rise over a long period. As a medium-long term investment, It!!!8217;s a sound proposition IMO.

Graham_Devon

Maybe it is a good proposition for the private investors. Let's face it, they wouldn't be taking it on if it werent.

Though I am more interested in what it means not to the investors, but the little people who bought into this. What it means for their remortgaging and terms etc.

I'm interested as to why the government would sell up (when they promised they wouldn't). Why now? Why sell a loanbook which, as you have stated, is such a good thing?

Jon_B_2

Re-mortgaging with an equity loan is already tricky. But there is no miss-selling conspiracy about this. All of the information was very clear to buyers before purchase what the deal is.

Most are sensible and have an exit strategy. Those who don!!!8217;t will probably pay unfavourable rates, whether the loan book is sold or not.

Graham_Devon

Jon_B wrote: »

Re-mortgaging with an equity loan is already tricky. But there is no miss-selling conspiracy about this. All of the information was very clear to buyers before purchase what the deal is.

Not really sure you get the full point here.

"The deal", if the loanbook is sold - could it change? "The deal" when people took it was that this was a government backed scheme and would remain as such.

If "the deal" is already changing into a "private equity company" holding your loan - what else could change? Well re-mortgaging almost certainly is at risk.

No point suggesting that buyers knew the deal when buying. We are talking about the potential here for that deal to change after purchase, but mid mortgage cycle. Clearly it won't change much, but not much has to change on such large mortgages where people only put up 5% deposits.

Not sure *that many* will have an exit strategy in truth either. We aren't talking about multiple ownership or investments here, we are talking homes. Very few families have exit strategies planned!!

Jon_B_2

Then that!!!8217;s their problem. I!!!8217;m fed up with individuals not taking responsibility for their actions. I was a FTB!!!8217;er with a HTB loan and I!!!8217;m not bothered about this potential sale. I!!!8217;m sure I!!!8217;m not alone.

Graham_Devon

Jon_B wrote: »

Then that!!!8217;s their problem. I!!!8217;m fed up with individuals not taking responsibility for their actions. I was a FTB!!!8217;er with a HTB loan and I!!!8217;m not bothered about this potential sale. I!!!8217;m sure I!!!8217;m not alone.

OK, good, I'm glad you aren't bothered about it, but this isn't a thread about you!

Jon_B_2

Hmmm. One would have thought a viewpoint from a homeowner currently utilising a HTB loan might have been a worthwhile contribution compared to the musings of a poster with a track record of having a stated agenda against HTB?

Apologies - would you rather I replied stating I was massively worried about this?

Thrugelmir

AFF8879 wrote: »

It is probable that the loans would be sold below their face value. Many investors make a killing buying non-performing loans at a chunky discount, and then maximising their recovery. Not saying these are non-performing, but there will always be an investor if the price is right.

Nothing to suggest that these loans are non performing. After all borrowers have had to meet higher standard criteria in obtaining the loans. Than interest only borrowers of the past. HTB hasn't been handing out free gifts.

For investors there's a nice RPI linked return.