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To think help to buy is a disaster waiting to happen

(53 Posts)
Ninmpy Fri 29-Jun-18 07:57:57

But it's the cost of the government's 20% slice of the loan that's really competitively-priced. For the first five years, it’s interest-free. In year six, you will be charged 1.75% which will climb at a rate of 1% of that figure plus any increase in inflation (as measured by the Retail Prices Index (RPI)), every year thereafter.

20% is a huge amount (and 40% in London). Soon lots of people are going to have to pay the amount back or face having huge ever increasing interest.

I don't think it was ever to help people, just to help the housing companies and keep the housing bubble inflated. All the housebuilders shares rocketed when the scheme was aannounced and extended. Prices have increased as affordability was increased due to this scheme, so it's hasn't helped anyone but big companies selling houses and banks selling debt imo.

I think many will not be saving like mad to pay it off. Just like how so many with interest only mortages have no plan to pay back the capital.

ClaudiaWankleman Fri 29-Jun-18 08:02:09

I agree, and add in shared ownership. SO has allowed property to be sold at an even more inflated price than on the open market. Young buyers see £120k and can afford it, but is that one bedroom really worth £480k in the long term? I would argue not.

Dragongirl10 Fri 29-Jun-18 08:02:37

Possibly some of what you say is true, but l had to struggle so hard to get my first mortgage this would have been a godsend for me.

And l was very disciplined with money so would have been able to pay off the extra 20% fast with tons of extra work. I also have used interest only mortgages several times, and have always had a plan on how to pay back the capital.
Some people will always be feckless with money but l do think it can really help those who are responsible.

Storm4star Fri 29-Jun-18 08:04:58

Of course it was never designed to help people. I’m surprised anyone thought otherwise!

Ninmpy Fri 29-Jun-18 08:05:54

Totally agree Claudia about SO, it's just inflating prices. The market would be better without all these props.

I get what you are saying dragon but even if you do pay it all back, it's still not really helping you if it's inflating the cost of everything.

iO mortgages increased the amount that people could borrow so could have just inflated the prices of houses also.

borlottibeans Fri 29-Jun-18 08:12:46

Round here it's all new builds, and all help to buy does is increase the price. Then when people want to sell a few years down the line they need to ask way, way too much for their tiny shoddily built box in order to pay back what they borrowed and are surprised when buyers opt for sensibly priced older houses instead.

It's a handout to builders to get them to build. Fine if that's your housing policy (well, not fine actually, build social housing instead!) But pretending it's helping people to get on the housing ladder is just a lie.

Racecardriver Fri 29-Jun-18 08:15:14

The purpose was to encourage house building. It worked. Obviously the market is over inflated now. That's why the tories have taken the backseat and are happy to loose to Labour in the next election so that they don't get blamed for the inevitable crash.

snapple21 Fri 29-Jun-18 08:15:43

That isn't true about inflating the price to make sure they can pay back what they borrowed - you only pay back 20 percent of the sale value not the original value

KittyVonCatsworth Fri 29-Jun-18 08:17:47

I agree with you OP. Smoke and mirrors helping everyone other than those it’s targetted at. ‘Help to Buy’ my arse. Brighthouse can help me buy an outrageously big TV at an overinflated overall cost, why would I want to take out (what seems to me in my v simplistic head) an enormous loan with an eye watering APR.

sandgrown Fri 29-Jun-18 08:19:05

Both DD and DSS have used the scheme and are very happy in their new homes . They know what they will have to do in 4 years but will be in a better position financially by then.

Laiste Fri 29-Jun-18 08:20:48

It is only available on new builds isn't it? Kind of tells you all you need to know ... helping to buy or helping to sell? Hmm.

When DH and i were looking into it we were cheerfully told ''oh - and just as long as you sell up and move on before the first 5 years is up you can just pay off the 20% then there's not problem at all !''

Wow - all so easy ...

NotAnotherUserName5 Fri 29-Jun-18 08:23:19

Agree! Mortgage adviser told us she didn't like them, and when we looked into it can see why.

Clearly designed to keep house prices high and help property developers.

NotAnotherUserName5 Fri 29-Jun-18 08:24:35

Plus you can't add a conservatory or extend until the loans paid back, so it's hardly like owning your own home.

ApolloandDaphne Fri 29-Jun-18 08:28:03

I know two young couples who have done this and it it worked very well for them. DD1 and her OH are planning to use the scheme to buy a place in London. It is the only chance they will have to get on the property ladder.

SnuggyBuggy Fri 29-Jun-18 08:28:27

I think people can be so desperate to get on the housing ladder they will do anything. The other alternative is often large monthly rental payments with nothing to show for it.

Fflamingo Fri 29-Jun-18 08:28:40

Surely anything which encourages house building can’t be all bad.

BellBookandCandle Fri 29-Jun-18 08:34:37

I agree it is more about supporting house builders than it is to help home buyers.
I also think it is carter Blanche to "inflate" prices - developers know they can charge more for the house because the Gov't will stump up 20%, ostensibly in the guise of helping people on to the housing ladder. Thing is, if they sell that house for 20% less it is immediately more affordable. However, this will never happen because no- one likes to think their house is worth less than they paid for it. It is also in the Gov'ts favour to keep house prices artificially high, as that way the 29%cut they get when buyers sell up is greater. I can't find any info what ch explains what happens if your home is repossessed or you are in negative equity and have to sell - and that worries me. There should be transparency so people know what they are getting into. However, I imagine many are blinded by the opportunity to own their home and fin't consider the consequences. I suspect these far outweigh the sensible buyers who make proper provision for repaying all parts of their mortgages/extra loans.

As a housing policy , help to buy is a lousy one. But it does allow the Gov't to stand up and say there are x'000 of new homes being built to help with the housing crisis. Thing is these need to be properly affordable homes or good quality social housing, not overpriced new build boxes. However, there's no money in that, so it's never going to happen. Sad, but true.

Grandmaswagsbag Fri 29-Jun-18 08:35:05

Of course it’s main objective is to keep the overpriced housing market afloat. That said my mum (in her 60s) has a shared ownership, mortgage until she’s 70. That’s successful for her. She couldn’t have bought her own place outright. What I’ve noticed about the newer ones though is that the rent for the part you don’t own is more like market rent, not HA. It would cost the same (or more) for us per month to have a shared ownership than it would to pay a full mortgage, and we have a good deposit! Ridiculous.

Alwaysadramaaa Fri 29-Jun-18 08:36:15

I did help to buy, I was renting paying more than what my mortgage is now. I over pay my mortgage so I can remortgage in the 5 years & repay the help to buy. I think it’s good for the right situation

BellBookandCandle Fri 29-Jun-18 08:36:51

Sorry about the typos - I know it is carte blanch/Gov't and 20% etc, but my phone thinks differently. Bloody rise of the robots!!!

laurG Fri 29-Jun-18 08:44:00

Agree. It’s a total sticking plaster so the government can avoid doing anything meaningful at all to help young people onto the housing market.

I live in London and even if I took the maximum loan from help to buy I still couldn’t afford the cost of a home to meet my needs. Shard ownership is also s con because you end up spending a fortune on ‘rent’ and service charges to make up for the part of the home you don’t own. We looked in to this and we would have been better off renting.

Plus what happens if your house price falls? Effectively you end up in negative equity with two large loans to pay off?

No government has the guts to actually do anything to really help people. They could stop oversees investors immediately if they wanted to. They could do more to discourage buy to let. They could actually build more social housing or make meaningful changes to the rental sector to give people a viable alternative to buying. But they don’t because they are too afraid to annoy big businesses or voters. It’s disgusting and it’s gking to cause big problems in the future.

Laiste Fri 29-Jun-18 08:53:42

SnuggyBuggy - I think people can be so desperate to get on the housing ladder they will do anything. The other alternative is often large monthly rental payments with nothing to show for it.

Exactly - a rock and a bloody hard place. Of course it will work for some. But what's the big picture?

It was the glib assumption that simply selling up within 5 years would easily make enough money to cover another move and make enough profit to pay off a 20% chunk of your mortgage which shocked me.

All these families happily shifting round the housing estates every 5 years bumping up the price of their house enough to cover their government loan hmm Really? I mean these new builds are already overpriced at the outset. Who are the people rushing in to buy all these expensive little boxes 5 years on baring in mind no one can afford them new!?

Not to mention the total gloss over of what happens if you can't move by then for some reason or DON'T amazingly become better off financially in 5 years.

Giving out mortgages based on being able to jump through financial hoops in 5 years just doesn't seem good practice. Not much better than the dishing out of massive 100% mortgages back in the 90s.

NCbecauseIdontwanttooutasaman Fri 29-Jun-18 08:55:25

All of these schemes, HTB, stamp duty exemptions etc distort the market and over inflate prices.The basic fact is that as a country we need to build 300,000 houses a year and have not got near that in decades. Until we do rental and purchase prices will continue to be high.

AngelicDarkness Fri 29-Jun-18 08:55:32

Completely agree. I'm gearing up to make my first move onto the market and honestly, shared ownership and help to buy are both awful.
The shared ownership houses are massively over inflated. For a single person on a lower income wage, I can afford the mortgage with ease - the rent on top? - not a chance. Most are 3 bed+ too.
The help to buy loan I'm not even considering. I'm doing the ISA but that's limited to £200 a month after your first payment into the account.
Luckily I live in a reasonably cheaper part of the country but it's insane. I think my main bug bear is that I can find tonnes of "Retirement" houses well within my budget. £30-40k less than everywhere else.Why can they build these houses and market them at significantly cheaper and yet can do the same for everyone under 55? I get the whole principle of they can usually buy outright but surely if the builders are making a profit on that why cant they do the same for first time buyers?

TokenBritPoshOfCourse Fri 29-Jun-18 09:04:04

We love ours. We’ve no intention of paying back the 20% until we sell, we can easily afford the interest and will downsize in about ten years anyway. Although if the market drops we’ll pay it back as you pay less that way.

It meant we could skip a rung on the ladder and buy a ‘forever house’ (bleeeee) and settle in for the next fifteen or twenty years in a large detached home. Our income has more than doubled since we bought it and we’ve overpaid the mortgage so we have a huge chunk of equity.

It’s not for everyone but it’s worked for us.

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