Why prop up the new build market instead of the ENTIRE property market??

Mr.Saver

AdrianC said:

SpiderLegs said:

Well I suppose we could argue that longer mortgage terms are actually an enabler that allows youngsters to get on the housing ladder.

Mmm.
Let's look at the reality...
£250k mortgage at 2%
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/
25yr - £1,060/mo, £318k total repayment, £68k interest
30yr - £925/mo, £333k total repayment, £83k interest

I'm unconvinced that £135/mo is going to be make or break for many borrowers. And if they realised that the extra five years was costing them another £15k in interest, I'm sure many borrowers would try to find it...

It's another example, imho, of looking at the monthlies and not worrying about anything deeper, simply due to financial illiteracy.

Not entirely true. If you use the HTB equity loan, your eligibility is constrained by the "Debt to household income ratio", which in reality is actually a monthly repayment to after-tax income ratio. This constrain forces you to take out a longer term mortgage if you happen to be a good saver (i.e.: earn a lot, spend a little) who lives in London and earns a decent salary.

Try the London HTB calculator at https://www.gov.uk/government/publications/homes-england-help-to-buy-equity-loan-calculator-and-guidance

Even you have more than £1,500 per month left after the cost of servicing debts, they still think you won't be able to afford it. Unless you choose a 33 years mortgage instead.

Thinking of buying without the HTB? Max amount of mortgage borrowing is limited to about 5*£50,000=£250k, so you will need to save £200k deposit for the same property. Good luck with that!

grumiofoundation

SpiderLegs said:

BikingBud said:

Thrugelmir said:

amandacat said:

My daughter bought a new build on HTB as it was the only way she could get on the property ladder but this means due to the inflated price she won’t be able to move for several years without being in negative equity. 

Overpay the mortgage. No doubt your daughter stretched her finances to the limit by taking out a long term for repayment.  We all have a choice as to where we spend our money. 

Whilst I would agree and fully support the premise of choice when buying other products; car, tvs, mobile phones it is simply not the same for housing.  Youngsters are being forced into excessively long mortgages just to get onto the so called property ladder.  Not only is getting onto the first rung extremely difficult, any future progress as they wish to settle and have space for families is stymied by the market that is rigged for the benefit of house builders and financial institutions.

Yet many still seem to think it is a good idea to have house price inflation. Emperor's new clothes?

HNY all. 

Well I suppose we could argue that longer mortgage terms are actually an enabler that allows youngsters to get on the housing ladder. 

This is assuming the lender will allow more to be borrowed because a longer term is taken.

We were told we had to choose between applying for a 37 year term (longest we could get) or going for a slightly higher salary multiple (5.1x vs 5x) but then having to go for a 30 year term - even though this increased the monthly repayments (vs 37 year term) by ~15%.

Thrugelmir

AdrianC said:

SpiderLegs said:

Well I suppose we could argue that longer mortgage terms are actually an enabler that allows youngsters to get on the housing ladder.

Mmm.
Let's look at the reality...
£250k mortgage at 2%
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/
25yr - £1,060/mo, £318k total repayment, £68k interest
30yr - £925/mo, £333k total repayment, £83k interest

I'm unconvinced that £135/mo is going to be make or break for many borrowers. And if they realised that the extra five years was costing them another £15k in interest, I'm sure many borrowers would try to find it...

It's another example, imho, of looking at the monthlies and not worrying about anything deeper, simply due to financial illiteracy.

Will interest rates remain at emergency levels for 30 years?   Personally I'd say not and wouldn't be making long term plans on such a basis. 

steampowered

mailmannz said:

Anyway, we are fortunate in not needing help to buy but the scheme, as its designed, doesnt seem to be there for the benefit of buyers and home sellers but for the benefit of property developers.

Yes, that is exactly the point. The government is trying to encourage house building.

I don't think HTB is a particularly good way of achieving that aim, but is a laudable goal nevertheless.

ian1246

AdrianC said:

SpiderLegs said:

Well I suppose we could argue that longer mortgage terms are actually an enabler that allows youngsters to get on the housing ladder.

Mmm.
Let's look at the reality...
£250k mortgage at 2%
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/
25yr - £1,060/mo, £318k total repayment, £68k interest
30yr - £925/mo, £333k total repayment, £83k interest

I'm unconvinced that £135/mo is going to be make or break for many borrowers. And if they realised that the extra five years was costing them another £15k in interest, I'm sure many borrowers would try to find it...

It's another example, imho, of looking at the monthlies and not worrying about anything deeper, simply due to financial illiteracy.

I'm in the process of buying a 3 Bed Detached House for £310,000, going in with a 25% deposit. We've opted to put our mortgage over 37years (I'm 31, Wife is 28) and fixed for 10 years (2.52% Interest) - £806 a month. Now... its true we're paying a higher interest rate for the 10 year fix, but this isn't too bad given the mortgage is over 37years. Our reasoning? Baby 1 is on the way - that couple of hundred £££ a month difference (vs. a shorter mortgage term) will make all of the difference in the next few years. We opted for a 10 year fix since the odds are we'll want a 2nd child in the future and wouldn't want the hassle/worry of worrying about re-mortgaging when Wife is on maternity or with significant child-care costs.

Now, the big downside is of course a much higher amount of £££ spent on Interest over the course of the mortgage - but flexibility of paying less now is far more important than longer term costs at this stage, given the stage of our life we are at i.e. starting a family with all the costs which that involves (child care!). That's not financial illiteracy - its eminently sensible to try and reduce fixed costs at the point where income will be most heavily strained (Wife on Maternity leave & then part-time work, coupled with private child care costs up until the child(ren) hit School age).

Plus my battle plan is to take what spare £££ we have and split it into 1/4's - 1/4 on directly overpaying the mortgage, 1/4 into High Risk ISA's, 1/4 into High Risk LISA's (accessible at 60) & 1/4 into savings - hopefully meaning the LISA & ISA's returns over decades (Historically far higher than current mortgage rates) will, in the long-run, go a long way to offsetting the extra interest paid on the borrowed mortgage amount spread over 37years vs. a shorter mortgage period. That extra cash would otherwise be going into the mortgage payments itself (potentially making a smaller return vs. what investments will provide over a 30year time frame). Needless to say - hopefully the overpayments alone will bring the term down  to less than 30 years in the long-run, but if not... thats what the LISA is for (to pay off any remaining mortgage amount when I hit 60).

It really isn't financially illiterate to take a debt such as a mortgage and spread it over a longer period - provided, of course, that your going to take the advantages which come with that and use them effectively (rather than, say, taking the extra free income & blowing them on new mobile phones, expensive meals or expensive cars - which inevitably is what some will do, but not all).

Thrugelmir

ian1246 said:

AdrianC said:

SpiderLegs said:

Well I suppose we could argue that longer mortgage terms are actually an enabler that allows youngsters to get on the housing ladder.

Mmm.
Let's look at the reality...
£250k mortgage at 2%
https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/
25yr - £1,060/mo, £318k total repayment, £68k interest
30yr - £925/mo, £333k total repayment, £83k interest

I'm unconvinced that £135/mo is going to be make or break for many borrowers. And if they realised that the extra five years was costing them another £15k in interest, I'm sure many borrowers would try to find it...

It's another example, imho, of looking at the monthlies and not worrying about anything deeper, simply due to financial illiteracy.

It really isn't financially illiterate to take a debt such as a mortgage and spread it over a longer period - provided, of course, that your going to take the advantages which come with that and use them effectively (rather than, say, taking the extra free income & blowing them on new mobile phones, expensive meals or expensive cars - which inevitably is what some will do, but not all).

For many people it's an event such as redundancy or relationship breakdown which blows such long term planning out of the water. 

BikingBud

SpiderLegs said:

BikingBud said:

Thrugelmir said:

amandacat said:

My daughter bought a new build on HTB as it was the only way she could get on the property ladder but this means due to the inflated price she won’t be able to move for several years without being in negative equity. 

Overpay the mortgage. No doubt your daughter stretched her finances to the limit by taking out a long term for repayment.  We all have a choice as to where we spend our money. 

Whilst I would agree and fully support the premise of choice when buying other products; car, tvs, mobile phones it is simply not the same for housing.  Youngsters are being forced into excessively long mortgages just to get onto the so called property ladder.  Not only is getting onto the first rung extremely difficult, any future progress as they wish to settle and have space for families is stymied by the market that is rigged for the benefit of house builders and financial institutions.

Yet many still seem to think it is a good idea to have house price inflation. Emperor's new clothes?

HNY all. 

Well I suppose we could argue that longer mortgage terms are actually an enabler that allows youngsters to get on the housing ladder. It used to be 110% mortgages but we’ve realised that isn’t a particularly wise idea.

We could also argue that ultra low interest rates are also a major benefit to youngsters too. If we had a scenario of lower house prices but higher interest rates, then those youngsters would be paying more of their money for financing costs rather than building up equity in their property.

Also, as soon as those youngsters do get on the housing ladder they start to benefit from house price inflation. Their salaries also are generally on an upward trajectory, giving them more scope to overpay, increase their equity and move further up the chain.

Yes it is difficult to get onto the housing ladder. It always has been. It has always been a choice decision for people, and granted there are certainly more choices to be made these days. However, the biggest factor that gets thrown out there is difficulty of saving whilst renting. Well guess what, that would have been difficult for pretty much anyone at any point in the last fifty years.

anyway I’m not sure what you think the alternative to house price inflation is, or how you think that would actually help anyone. The actual solution is really the same as it has been for a long time and what has been pointed out as the reason for the govt strategy - build more housing.

Perhaps it's just me but the greatest help to youngsters would be reducing the obscene profiteering. We can control that by acting to reject the extreme prices that are being asked.  We are screwing our own kids and grandkids because some like to think their houses are worth so much more the kids are forced to borrow so much more.

Unfortunately that jack attitude pervades society.

SpiderLegs

BikingBud said:

Perhaps it's just me but the greatest help to youngsters would be reducing the obscene profiteering. We can control that by acting to reject the extreme prices that are being asked.  We are screwing our own kids and grandkids because some like to think their houses are worth so much more the kids are forced to borrow so much more.

Unfortunately that jack attitude pervades society.

How would you suggest we act to reject this extreme pricing?

BikingBud

Offer significantly less.

As the general belief is that a house is what people are prepared to pay, why on a money saving website do we not encourage that we should pay less for the most significant purchase we are likely to make?

People go to great extremes to set up multiple bank accounts and shuffle money around to generate a few extra pounds or scrape to get the best saving's interest rates or save coupon and vouchers but apparently baulk at challenging the price they pay for a house. They would rather accept that it's normal to have a 30-35 year mortgage than speak the heresy of suggesting perhaps a 10-15% reduction in the house price.  Bizarre!

Unfortunately the house price inflation mantra is believed by too many and the sheeple will not challenge. 

SpiderLegs

BikingBud said:

Offer significantly less.

As the general belief is that a house is what people are prepared to pay, why on a money saving website do we not encourage that we should pay less for the most significant purchase we are likely to make?

People go to great extremes to set up multiple bank accounts and shuffle money around to generate a few extra pounds or scrape to get the best saving's interest rates or save coupon and vouchers but apparently baulk at challenging the price they pay for a house. They would rather accept that it's normal to have a 30-35 year mortgage than speak the heresy of suggesting perhaps a 10-15% reduction in the house price.  Bizarre!

Unfortunately the house price inflation mantra is believed by too many and the sheeple will not challenge. 

Nothing more than basic principles of supply and demand. Every house purchase is a personal negotiation, there is no blanket approach that says always go in at 10-15% below, because quite obviously if the house is in demand someone else will offer more.

as far as I can see there is only one main culprit on here who takes that view and I think we all know how successful their house buying journey has been for the last ten or so years