Help to Buy - watching a car crash

avacapri

Having looked into the help to buy scheme, it seems that the government have a responsibility to undertake an urgent review, whilst I admit without it many people would not have bought a home, having now bought their new home 100's of thousands of people will become trapped in a property that was overpriced when they bought it with little hope of selling, it is scandalous bordering on criminal how new builds are sold and the RCIS have a responsibility for the way its members have valued properties, how can anyone say like I have 'some new builds are overpriced' if that purchase is backed up by a mortgage valuation.
An urgent review should be undertaken to see if the scheme should be extended to all properties for FTB's and to see if the process of selling a new house needs regulating.

Interested in other views of the scheme.

Smellyonion

Mortgage companies responsibility to ensure it is the correct value.
HTB equity loans actually mean that should a property had been overpriced, the buyer could buy out the government for less than they loaned.

avacapri

The mortgage company dont care they have the first charge on the property at 80% loan to valuation
and if the property does go down its the buyer that will lose out first

as I understand it if the buyer has 5% on a property purchase 200k and takes out 20% HTB
40k FROM GVT
10k SAVINGS
150K MORTGAGE

say the house is overpriced and has fallen 10% (reports say this is conservative) and the buyer manages to sell

sale price £180
mortgage company get their 150k back first
the government want 20% back to the gvt - 36K
total £186k not enough to go around and the seller has lost their initial deposit, the government still want the money back so the seller is left with a loan of 6k.

my view is that the scheme is a potential nightmare

anselld

As a finance scheme it is perfectly reasonable. In fact you would be worse off if you had fully purchased at the same price without the scheme. Indeed any purchase will be painful if prices are falling.

The problem is not the finance scheme but the over-demand and under-supply of housing and peoples strange obsession with purchasing new-build when much better value can be had elsewhere.

AnotherJoe

avacapri wrote: »

Having looked into the help to buy scheme, it seems that the government have a responsibility to undertake an urgent review, whilst I admit without it many people would not have bought a home, having now bought their new home 100's of thousands of people will become trapped in a property that was overpriced when they bought it with little hope of selling, it is scandalous bordering on criminal how new builds are sold and the RCIS have a responsibility for the way its members have valued properties, how can anyone say like I have 'some new builds are overpriced' if that purchase is backed up by a mortgage valuation.
An urgent review should be undertaken to see if the scheme should be extended to all properties for FTB's and to see if the process of selling a new house needs regulating.

Interested in other views of the scheme.

There are several posts here from people trying to by a HTB and complaining bitterly they've been "stitched up" or their "life ruined" by a surveyor because the valuation came in below the price the builder is asking ! You just cant win.

lookstraightahead

Maybe part of the procedure could be a lesson on how the property market works so that buyers understand the value could go down to?

Or should everyone just remain a victim?

avacapri

it's difficult to justify when building companies are posting £billion profits because of the HTB scheme, I recently read in one of the financial publications concerning building shares, that for the first time on 'moral' ground they do not recommend buying shares in the company because they are profiting from a scheme that restricts options for buyers.

i don't agree with some building companies over pricing properties but I can understand it, they will go for as much profit as they can mainly from the financial cannon fodder the First time buyer - where else can the 500,000 buyers that have taken a HTB go?

The problem is the HTB scheme it restricts the market and encourages exploitation.

avacapri

professionals and politicians have a responsibility to ensure that they take all steps to try and prevent this for buyers/lenders
that should not include restricting the market - and allowing the big builders to package sales through their site agent

Mrs36

I completely agree with you. I don't doubt it had good intentions, but of course in reality it has just allowed developers to increase their prices.

I don't mean to sound like a doom-monger but I really think this is a ticking time bomb for a lot of people (see also interest only mortgages) . I hear so many people say that at the end of the help to buy period "they'll just remortgage and pay off the loan with the equity from the increase in value".

Of course no one likes to think their investment will go down, but I don't think these people have even considered that their property might not be worth what they paid for it (never mind not increased in value).

avacapri

welcome to the boom-monger club

i think the only reason the scheme was restricted to new build was because the govenment have targets to meet.

If it was to protect the government's own investment - well that backfired.

The scheme lasts to 2023 (or thereabouts) surely they should review it.

i have spoken to the RCIS who were a bit blase about it, and some estate agents who feel that the way big builders sell homes is wrong.

PasturesNew

I live next door to a small development that was sold mostly under the H2B scheme. Most went to such people. I believe that from 9 built, one paid cash from an inheritance, two went to new BTL landlords and six were sold under H2B.

When they were being built/sold, my identical house next door didn't have "the same market". I couldn't sell to a FTB because they could buy those "cheaper" as they only needed to sort out 80% of the price.

Now they've all moved in, if they want to sell, they, too, will be "up against" the same problem - that a lot of the market, FTBs, will be drawn towards new builds all the time because of the lower price of entry.

It has, in a way, stuffed up the resaleability of the cheaper end of the market somewhat because of that. FTBs buying FTB type of houses will not have any FTBs to sell to ... as they're buying new builds.

This is another "trap" these people will find themselves in. They will discover they can't remortgage, and/or can't afford the loan costs, and/or selling is slower than they thought because FTBs aren't looking at 2nd hand houses.