so th ill-conceived help to buy scheme will now start this week.

[kissmyheathenass]

How come they found money for that then? Surely it's going to cost more than the bedroom tax saves?

[kissmyheathenass]

Does no one else think it's going to end in disaster? Boom and bust. Banks richer, land owners richer. House proved further out of reach. More homes repossessed. Ffs.

[CogitoErgoSometimes]

The scheme is the government lending the money that other financial institutions won't cover. It's repayable with interest so, even factoring in defaults, I'd be surprised if it didn't generate money ultimately.

[meditrina]

What is it likely to cost?

It means that buyers of properties (max £600k) only have to pay an upfront deposit of 5% and any further deposit required by mortgage lender will be covered by a Government loan.

So it'll need up front money, but should be cost neutral in the longer term.

Perhaps it's a govt version of the Bank of Mum and Dad for those who don't have families who can help them amass a deposit? Or perhaps the scheme should be called a Mandelson as it's an official, upfront version of what he did on the sly?

[kissmyheathenass]

But to me it seems just like sub prime lending in US and that didn't end well did it? I think lots of people will lose homes they couldn't afford in the first place. It's rate for me to agree with Vince cable but in this I do.

[meditrina]

It's not like sub-prime, as it doesn't let you mortgage over 100%, and you have to pay at least 5% as an upfront deposit. Someone who has amassed up to £30k wouldn't fit the profile of a sub-prime borrower.

But yes, it's designed to prop up property prices. Very slow, gentle growth is probably the desirable outcome. I'm far from sure that any centralised scheme is likely to help much.

[niceguy2]

on this one, the cost isn't the issue. They're only guaranteeing the money if the lender defaults.

The question remains if this is a good thing to do. On that one, I'm not sure.

We're going back to the government distorting the market and that never ends well.

[CogitoErgoSometimes]

Sub-prime involved 100%+ LTV loans to people with bad credit, not enough income to pay back, gambling that the property value would increase. Often interest only. In this scheme, the banks are lending 75% of the property value, the government is lending 20% and it has to be a repayment mortgage. Presumably, the tests relating to credit-worthiness, income & affordability are still going to be pretty stiff but, if the mortgagee defaults, the hit would be split between the bank and the exchequer rather than just one or the other. Spreading the risk.

[noddyholder]

It is a disaster waiting to happen. I know lots of developers and agents and they are rubbing their hands.

[Viviennemary]

I think it's a totally mad idea. It will lead to boom and bust again. If people can't save the deposit, how will they pay back the deposit and pay a mortgage. In a few years time we will have people having their homes repossessed because they borrowed more than they can afford to pay back. And on homes up to £600,000. I thought it was supposed to help first time buyers. Insanity!!!!

[Svrider]

Interestingly enough our local bank had a new buyers scheme where they helped with budgeting, finances, moving fees, surveys,estate agents, small loans etc.. And was linked directly to affordable mortgages
Worked really well for almost 150 local people to buy their first home without overextending themselves

It's had to be stopped because it doesn't meet the governments new requirements

[noddyholder]

Definitely will lead to boom and bust I renovate houses and people keep saying to me I bet you are going to love this! It is going to make some people a lot of £ but for those who partake of it I think there will be trouble ahead with negative equity and an inability to meet payments once they have to start paying interest on the govt bit Not to mention if rates rise which they will eventually as Carney has this week said no more QE and I think next will be higher rates. In fact I wouldn't be surprised if Cameron didn't foresee IR rises and that is why he has rushed this in

[MrJudgeyPants]

This is madness. As Niceguy says, any attempt by the government to game the market will end in disaster.

I have the deepest sympathy for any of our politicians who try to sort out the mess that is high house prices. Simply put, high house prices hardly benefit anyone. However, so many of us bought vastly overpriced houses that any significant readjustment of prices back to a sensible figure will drive millions of mortgage payers into negative equity and almost certainly throw our economy back into recession.

[noddyholder]

Constant mad cap schemes are just putting off the inevitable Prices will have to fall and repossessions rise at some point. A conventional correction which is normal in the cycle in 2005 was avoided by 'loose' lending and the govts ever since have kept it going. After help to buy runs out of steam then what?

[kissmyheathenass]

noddy, I think so too. IR cant stay so low for ever. However, I suppose we will all feel so much richer as our house prices temporarily rise that we will vote for DC again come 2015 . Meanwhile those the scheme was meant to help will be priced further out of the property ladder.

And when the bubble does burst, the banks wont lose out as the tax-payer will be guaranteeing any losses.

Do people really think this is a scheme to help FTBs? I'd happily wager the only winners will be the banks and the already asset-rich.

[NotYoMomma]

its so they can temporarily inflate the housing market and it will skew the figures to show Growth in the economy and markets and they can say 'ooooohhh lookie!' before the election.

then the shit will hit the fan

[pumpkinsweetie]

It's a ploy to show growth, when in fact there isn't any

[NadiaWadia]

It is a bloody stupid, shortsighted idea. It is quite obviously just going to inflate the bubble.

[NicholasTeakozy]

It's absolutely going to cause a bubble, one which will burst as soon as interest rates rise, which they're going to have to due to QE devaluing the £ in the long run. I think the difference between the coming crash and the last one will be that the next one will be worse, rates cannot be kept artificially low for ever.

[ttosca]

It's amazing that in 2013, some people can still talk about the existence of 'free-markets' free from the 'distortion' of government.

La la land.

[claig]

Bad policy which may backfire and not deliver votes.
One Nation Labour are promising to freeze everyone's energy bills and the Tories want to help people buying houses.

They say it is for "hardworking" families, but what will all the "hardworking" families prefer - One Nation Labour's policy or Clueless Cameron's policy.

[claig]

"The scheme is expected to enable banks to release £130 billion of loans for buyers of properties worth up to £600,000 who could not raise a larger mortgage deposit on their own."

www.telegraph.co.uk/news/politics/david-cameron/10342014/David-Cameron-My-mortgage-plan-for-struggling-families.html

So while some hardworking families lose their homes because they can't afford to pay the bedroom tax, the State will offer a "help to buy" scheme for some properties worth up to £600,000.

Great! What spin doctors do they employ? Even McBride wouldn't have come up with a plan like that.

[claig]

"enable banks to release £130 billion of loans"

So banks couldn't even be forced to lend money to small businesses who were crying out for it in order to expand and take on new staff, but they will find such a huge sum for houses.

[MrJudgeyPants]

Ttosca "It's amazing that in 2013, some people can still talk about the existence of 'free-markets' free from the 'distortion' of government."

You are absolutely right. We've had successive governments cynically stoking house price inflation whilst at the same time limiting the supply of new builds through restrictive planning systems. When the wheels came off the wagon, the governments first instinct was to support the very people who'd made the most money from that inflation by bailing out the banks, and even now, we have the government interfering with the system to allow more people to over-extend themselves by guaranteeing their mortgage deposits.

Likewise, elsewhere in the news, the same person who championed the Climate Change Act which artificially raised everyone's energy bills is the same wallah proposing a cap on energy prices...

Under these (and many other) circumstances, surely a free market solution would be far more preferable, and cheaper for us all, than the 'distortion' which the state brings.

[Wonderstuff]

I'm upset it's been brought forward.
DH and I both earn slightly above average wage. The cheapest 3 beds in my area go for about £200K. We've given up on the idea of owning because the idea of saving more than my gross annual salary in deposit was so out of reach we felt we would never be able to buy a house. Being able to get a mortgage with 5K of savings is probably achievable at some point. It would mean that we had to cut back a lot and save very hard, but we would do that to get the security of being homeowners.

My worry with the scheme is though that it will push prices up further and so out of reach by the time we had saved. Our local council was running a similar scheme that was limited to first-time buyers and properties below £250K - which seems more sensible.

I wish councils could just be able to build more houses. And that the law on private renting would allow people like me more stability. I would be happier renting if I had more security. Buying houses seems like such a gamble with this scheme as there is uncertainty around interest rates and house prices falling.