HTB interest free period is now up

The-Joker

The first of the help to buy loans that were interest free for 5 years now have to start paying interest on their entire amount.....

Every month from now on the amount of people having their interest free period over is increasing....

The-Joker

https://www.ft.com/content/633f5bc4-1e2b-11e8-956a-43db76e69936

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https://www.ft.com/content/633f5bc4-1e2b-11e8-956a-43db76e69936

Thousands of homeowners with Help to Buy loans will face a squeeze on their finances as the first fees fall due to the government next month, experts have warned.

Under its flagship Help to Buy equity loan scheme, the government offered borrowers an equity loan of up to 20 per cent of the value of a newly built home, or 40 per cent in London.

Although the loans are interest-free for five years, after that borrowers must begin to pay a fee of 1.75 per cent of the value of their loan, increasing each year by RPI plus 1 per cent.

The Resolution Foundation, a think-tank, said the fees presented !!!8220;a ticking time bomb!!!8221; for families who held Help to Buy loans.

From next month up to 2,000 housebuyers who took the first loans out in early 2013 will begin to pay the fees, with many simultaneously paying off mortgages with commercial lenders.

The-Joker

https://www.ft.com/content/633f5bc4-1e2b-11e8-956a-43db76e69936

Lindsay Judge, senior research and policy analyst at the Resolution Foundation, said the fees on the Help to Buy loans could provide a !!!8220;double whammy hit!!!8221; to borrowers when combined with any rise in interest rates.

According to recent research from Savills, the estate agency, a 1 percentage point rise in interest rates would add more than £900 a year to the cost of servicing the average UK mortgage.

!!!8220;There is a group of people who are exposed, and there will potentially be a significant impact on their living standards,!!!8221; said Ms Judge.


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The Ministry of Housing, Communities and Local Government published an evaluation of the scheme in partnership with Ipsos Mori and the London School of Economics in February 2016 after interviewing lenders, borrowers and developers.

It found that although close to 60 per cent of borrowers said they had a great deal of understanding about the financial commitments involved in taking out the loan, lenders were concerned that borrowers did not fully understand the loan.

HPC_Ghuol_Hunter

So what, every month from now on the amount of people paying off their mortgage and living mortgage free is increasing....

mayonnaise

The-Joker wrote: »

Lindsay Judge, senior research and policy analyst at the Resolution Foundation, said the fees on the Help to Buy loans could provide a !!!8220;double whammy hit!!!8221; to borrowers when combined with any rise in interest rates.

It's a good thing that the equity loan part is protected from any interest rate rises then.
As it's fixed at 1.75% for year six and 1.75% + RPI + 1% from year 7 onwards. :beer:

Thrugelmir

The-Joker wrote: »

From next month up to 2,000 housebuyers who took the first loans out in early 2013 will begin to pay the fees, with many simultaneously paying off mortgages with commercial lenders.

Borrowers have been subject to onerous affordability checks. The historic interest only loans that exist pose more challenges. Than the more recent repayment based HTB loans. Where borrowers are at least building some equity.

teddysmum

My son specifically saved an amount to pay his back, this year, but was very surprised by the cost of doing this, as it involves using a solicitor.

MobileSaver

The-Joker wrote: »

a 1 percentage point rise in interest rates would add more than £900 a year ... there will potentially be a significant impact on their living standards

Wow! An extra £75 a month, that will bring the country to its knees... or maybe not?

chucknorris

The-Joker wrote: »

The first of the help to buy loans that were interest free for 5 years now have to start paying interest on their entire amount.....

Every month from now on the amount of people having their interest free period over is increasing....

They have had 5 years advance notice, so maybe they have planned and prepared for paying it? Don't you tend to think ahead and plan your finances?

AG47

chucknorris wrote: »

They have had 5 years advance notice, so maybe they have planned and prepared for paying it? Don't you tend to think ahead and plan your finances?

Many didn't understand what they were getting into, as interest rates rise they will be struggling to even pay back the part of the house that the bank owns, now they have to pay back to the government as well

Interest rates are only going up from here

chucknorris

AG47 wrote: »

Many didn't understand what they were getting into, as interest rates rise they will be struggling to even pay back the part of the house that the bank owns, now they have to pay back to the government as well

Interest rates are only going up from here

It is hardly rocket science is it? I'm sure that nearly all of them knew exactly what they were getting into, and the few that didn't, well if they are that pathetic, their mothers should have never let them leave home.