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Budget 2021: Mortgage guarantee to help buyers with 5% deposit

Discussion in 'General Discussion' started by dowie, 27 Feb 2021.

  1. dowie

    Capo Crimine

    Joined: 29 Jan 2008

    Posts: 52,097

    https://www.bbc.co.uk/news/uk-56218952
    Surprised there isn't a thread on this already given there are some quite vocal posters on the subject of housing and affordability - particularly people who resent paying landlords when they could be making the same payment on a mortgage...

    For people who hate the fact that they're "throwing money away" every month to some landlord when they could be paying the same amount towards a mortgage instead this seems perfect... Of course, with only a 5% deposit you could easily end up in negative equity should prices drop a bit and lose the flexibility of being able to move house but that's the clear trade-off here, you can avoid that by sticking with the landlord and letting them take on that risk instead.

    For personally, this might help prop up prices for a little bit, I don't want to sell my place right now but quite likely will within a couple of years so it's great if there are more buyers available for a bit with minimal deposit needed. On the other hand, post-Covid, we could have all sorts of issues in the future and obvious risks are obvious... (granted at least we're not in the EU/eurozone).

    Would be interested in the thoughts of some of the more vocal property commentators - will you look to take advantage of this scheme?
     
  2. dLockers

    Suspended

    Joined: 21 Jan 2010

    Posts: 4,748

    There is, it's in Speakers Corner.
     
  3. dowie

    Capo Crimine

    Joined: 29 Jan 2008

    Posts: 52,097

    Ah, just saw that thread, albeit with a rather vague thread title. Anyway, I'm not posing some general political question/inviting a general debate re: governments encouraging borrowing but rather, on the basis of previous GD threads, I'm asking about property and what posters think of this particular scheme.
     
  4. HangTime

    Man of Honour

    Joined: 25 Oct 2002

    Posts: 28,879

    Location: Hampshire

    Not sure about this, my gut response is I don't like high LTV being available especially in a period of economic instability, arguably part of the last financial crisis was due to 'bad debts' like at Northern Rock etc. That said, maybe having a guarantor de-risks this a bit (or does it, if the state is underwriting it...?)
     
  5. platinum87

    Soldato

    Joined: 25 Nov 2007

    Posts: 5,152

    Location: London

    @dowie

    Yes this increases affordability and pushes house prices up.

    At the same time, it's good for those who use it as property prices don't react so quickly.

    FoxEye et al do not understand the difference between house prices vs income and housing costs vs income. so not sure what you hope to gain from that.
     
  6. Narj

    Capodecina

    Joined: 19 Feb 2010

    Posts: 13,125

    Location: London

    I wish they'd just stop tinkering with the market in this way, they are making things worse long-term by driving prices up.

    Ideally, curb foreign investment in property and put an exponential tax on additional properties that are not the main residence to give people a realistic chance of owning a home. (IMHO).
     
  7. Stumble Bum

    Mobster

    Joined: 2 Apr 2009

    Posts: 2,976

    Location: Location, Location!

    They don't seem to understand that it's not getting a deposit that is difficult to get on the ladder it's the ridiculous house prices. Unless you are earning a very good salary you are not going to be eligible for a big enough mortgage regardless.

    They need policies which will lower average house prices not increase them. I.e increase supply.
     
  8. Semple

    Sgarrista

    Joined: 5 Mar 2010

    Posts: 8,176

    Wasn't the issue with Northern Rock more due to 100%/105%+ LTVs? So effectively the owners had zero equity, or negative equity right from the start.

    I'm just at the start of my mortgage term, and if we weren't overpaying then interest due works out close to 50% of the monthly payment. Basically making it very hard to built up equity for a good 5-10 years.

    It's not clear yet exactly what these incentives will be from the government. Whether they will pay the bank for each 95% mortgage, or provide some costs as collateral in the event of any losses.
     
  9. stuman

    Wise Guy

    Joined: 27 Aug 2003

    Posts: 2,007

    5% is great but the mechanism in the background is what counts.

    ideal world would be an average interest rate but fixed for a nice long term to give the buyers some long term security. 15 years.

    can’t really comment until the details are released.

    A week ago we secured our mortgage and are moving towards exchanging. We might switch our mortgage out to one of these if it makes sense.
     
  10. FoxEye

    Caporegime

    Joined: 17 Feb 2006

    Posts: 27,423

    Location: Cornwall

    You'll have to talk slowly and use simple words, please.

    How does increasing prices and loading people with more debt increase affordability?

    @dowie Obvious troll thread is obvious. The contempt on display is palpable.

    Seems to be a thread for home-owners to take the **** out of renters. Stay classy.
     
    Last edited: 28 Feb 2021
  11. grudas

    Capodecina

    Joined: 12 Mar 2008

    Posts: 21,138

    Location: West sussex

    Great. As if stamp duty changes didn't drive the prices up already this will add more. We've been saving for a while and are close to our 10% deposit but the prices have been going up again and we're just trying to keep up. It's ridiculous.
     
  12. dLockers

    Suspended

    Joined: 21 Jan 2010

    Posts: 4,748

    Good news then you only need 5% and the rest can be over payments.
     
  13. platinum87

    Soldato

    Joined: 25 Nov 2007

    Posts: 5,152

    Location: London

    A person with little money cannot afford to buy a house, all of a sudden, its 95% LTV. Now that person can afford to buy a house.

    Thus increasing affordability.

    Prices increase as a consequence of affordability.
     
  14. Kenai

    Capodecina

    Joined: 5 Apr 2009

    Posts: 21,162

    Another scheme that will help keep house prices propped up whilst telling everyone everything is more affordable now because they can just borrow more money to pay for it.
     
  15. dLockers

    Suspended

    Joined: 21 Jan 2010

    Posts: 4,748

    The thing is you continue to moan about the situation but do absolutely nothing to better yourself. The goal posts have just moved in your favour, take advantage.

    Or the reality is you are happy living at home with your Dad and have no desire to move out.
     
  16. dLockers

    Suspended

    Joined: 21 Jan 2010

    Posts: 4,748

    Isn't that the literal definition of affordability?

    With the bank securing 5% it means interest rates can stay the same as the bank is managing the same risk profile as a 90% LTV.

    I'd be all over this and then making up for it with overpayments.
     
  17. Uther

    Capodecina

    Joined: 16 Jun 2005

    Posts: 15,838

    Surely good news for anyone struggling with a deposit, but I suppose it will just push house prices up further.
     
  18. 413x

    Capodecina

    Joined: 13 Jan 2010

    Posts: 22,370

    Location: Llaneirwg

    For the sake of the next generation this relentless house price increasing needs to stop.

    How is late life care going to be paid for if the vast majority of the country get to the point of not being able to work for medical reasons with no pension and no assets?

    It really won't take much to put people on 95 percent ltv into negative equity
     
  19. HangTime

    Man of Honour

    Joined: 25 Oct 2002

    Posts: 28,879

    Location: Hampshire

    Yes they even had up to 125%(!) LTV iirc. But NR was just an example, the principle is the same, with 95% LTV you can be in negative equity pretty quickly especially if the mortgage is over a long term and doesn't have a low rate. When I was growing up you were told to expect minimum 10% deposit, although of course interest rates were higher then to.
     
  20. Kenai

    Capodecina

    Joined: 5 Apr 2009

    Posts: 21,162

    Only in one sense IMO.

    Taking random figures, If a bank is only willing to lend you £90,000 based on your income/expenditure anyway, whether you can get a £95,000 mortgage over a £90,000 mortgage, isn't necessarily going to do you any favours and won't get you any closer to being able to buy a £100,000 house.

    It will help people who could be lent £95,000 based on income/expenditure but were struggling to save £10,000 when the bank would only lend £90,000 against a £100,000 house though.