5% government mortgage guarantee

Penguin666

Will the 5% government guarantee mean that interest rates will be lower now there is less risk for the lender? Not really a good deal of interest rates are high, it seems this is actually aimed at the rich getting richer than helping youngsters.

Mickey666

Why would "the rich" need 95% mortgages?

Thrugelmir

The guarantee will have to be paid for. There's no free lunch. 

lonibra

Thrugelmir said:

The guarantee will have to be paid for. There's no free lunch. 

Genuine question, how do you mean?

Are you referring to the taxpayer and the absence of a magic money tree? 

Or the interest rate premium on 95% LTV mortgages paid by the borrower?

2021BJ

lonibra said:

Thrugelmir said:

The guarantee will have to be paid for. There's no free lunch. 

Genuine question, how do you mean?

Are you referring to the taxpayer and the absence of a magic money tree? 

Or the interest rate premium on 95% LTV mortgages paid by the borrower?

I can't see the taxpayer being particularly happy about subbing bank profits, or house buyers, so I can only see the cost being borne by the borrower.

Thrugelmir

lonibra said:

Thrugelmir said:

The guarantee will have to be paid for. There's no free lunch. 

Genuine question, how do you mean?

Are you referring to the taxpayer and the absence of a magic money tree? 

Or the interest rate premium on 95% LTV mortgages paid by the borrower?

On the basis that it's a scheme to encourage lenders to advance money.  Participating lenders pay a levy to the Treasury on business underwritten. A pooled fund to cover the defaults incurred will need to be created. The taxpayer won't be exposed to any losses. 

Penguin666

I mean:  House prices are so high and if you can only afford a 5% deposit, then you are unlikely to be able to afford repayments with current interest rates.  Therefore, this seems like only the well-off can use it, which defeats the point of the scheme. 

lonibra

Thrugelmir said:

lonibra said:

Thrugelmir said:

The guarantee will have to be paid for. There's no free lunch. 

Genuine question, how do you mean?

Are you referring to the taxpayer and the absence of a magic money tree? 

Or the interest rate premium on 95% LTV mortgages paid by the borrower?

On the basis that it's a scheme to encourage lenders to advance money.  Participating lenders pay a levy to the Treasury on business underwritten. A pooled fund to cover the defaults incurred will need to be created. The taxpayer won't be exposed to any losses. 

That's great then isn't it. Borrowers decide if they want to pay the price.

Mickey666

Penguin666 said:

I mean:  House prices are so high and if you can only afford a 5% deposit, then you are unlikely to be able to afford repayments with current interest rates.  Therefore, this seems like only the well-off can use it, which defeats the point of the scheme. 

That makes no logical sense.  Deposits and repayments are in no way related.  There must be many people living in rented houses paying MORE rent than the repayment on a 95% mortgage but who are not able to save for a deposit faster than house price inflation.

Also, the 'well-off' are not likely to be the ones struggling to find a deposit are they?

SpiderLegs

Mickey666 said:

Penguin666 said:

I mean:  House prices are so high and if you can only afford a 5% deposit, then you are unlikely to be able to afford repayments with current interest rates.  Therefore, this seems like only the well-off can use it, which defeats the point of the scheme. 

That makes no logical sense.  Deposits and repayments are in no way related.  There must be many people living in rented houses paying MORE rent than the repayment on a 95% mortgage but who are not able to save for a deposit faster than house price inflation.

Also, the 'well-off' are not likely to be the ones struggling to find a deposit are they?

Agreed. High deposit requirements are the problem, not monthly repayments.

Thrugelmir

lonibra said:

Thrugelmir said:

lonibra said:

Thrugelmir said:

The guarantee will have to be paid for. There's no free lunch. 

Genuine question, how do you mean?

Are you referring to the taxpayer and the absence of a magic money tree? 

Or the interest rate premium on 95% LTV mortgages paid by the borrower?

On the basis that it's a scheme to encourage lenders to advance money.  Participating lenders pay a levy to the Treasury on business underwritten. A pooled fund to cover the defaults incurred will need to be created. The taxpayer won't be exposed to any losses. 

That's great then isn't it. Borrowers decide if they want to pay the price.

Normal underwriting criteria still applies.