To think help to buy is a disaster waiting to happen

[Ninmpy]

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.

They are up building new flats / houses near where I live under help to by. They are not in the best area and seem very overpriced for local market.

I think there will be a lot of people stuck in them in 5 years time because I cannot see why people would buy them from over older flats in the same area that will be much lower priced.

It's worked well for a young couple I know.

I also agree about the "help to buy" and shared ownership - but add in artificially low interest rates

As others have said, the whole thing props up unrealistic prices and helps nobody except developers in the long run

All government 'initiatives' I can think of have been an unmitigated failure - Green Deal anyone? They are either too costly, complicated and unwieldy to administer, while delivering very little, or provide fantastic opportunities for conmen.

The retirement properties are cheap to purchase on the second hand market because they carry huge service charges - £4k to £6k p.a. is not uncommon. You also have to pay a slice to the developer or management company when the property is sold out of the proceeds. They are not usually a good buy for older people and only attractive because of the difficulties in getting care in your own property.

I agree too. DP & I are the ideal candidates for help to buy but we would rather stick to our small flat for a couple more years and save a larger deposit. I have a friend who is in a help to buy new build and she thinks they will have no problem selling for much more than they purchased before they need to pay the loan back. I'm guessing it was the sales people at the developers who told her this as I don't see it happening at all. There are loads of houses for sale on that estate and no-one wants them. Poorly build and now considered a rough area.

Well done OP for bringing this debate up. It's a disgrace. Housing affordability is going through the roof - the proposed remedy is to channel money through the hands of the relatively-well-off to the banks and the housebuilders, so that house prices go up even more. At the same time, social housing is undermined more and more - Right to Buy, ban on councils borrowing to build, the benefit cap, etc etc etc.
It's ideologically-driven bollocks and one of the contributory factors to why we've got people sleeping on the streets. It makes me bloody furious.

Help to Buy is totally fulfilling its purpose, which was always about keeping house prices going up, providing help to those that don't really need it and filling the pockets of the house builders.
Right to Buy wasn't a bad idea, the killer was not allowing replacement homes to be built, so effectively privatising "rental / social housing". Like the privatisation of the Utilities, Train and Transport, Prison, Probation etc. has been a disaster and the end result of costing people more.

Only in this morally bankrupt country where bedroom tax is inflicted on the most vulnerable to pay for the least deserving and more is acceptable. In time of austerity where police, education, health and wellbeing have all been slashed its Ok to give £10,000's of "Benefits" to people that can afford a £400,000 mortgage. Meanwhile life in food bank land is well a bit grim, but everybody has to dig deep to help the help to buy scheme. The irony seems lost on Vince Cable whose party helped introduce both HTB and Bedroom Tax. Lets not forget us being the Money Laundering Capital due to house sales.

Rising populations and housing shortages fuelled by building wrong houses to meet majority needs only leads to increased profits increased house prices. They fiddled the inflation figures for years to keep interest rates low, ignored the massive multiples, 100%+ mortgages until it hit he buffers. Then the poor sods that gained least, pay most.

The issue is on whose watch does the hit come. Because it will only happen when it effects enough people that vote and they may lose their jobs that something will be done.

Either way its not going to be pretty and it won't be the fault of those that have voted for it for years, it will be those other scumbags.

I agree. It's always been a totally false claim that we a) don't have enough money to pay for public services while b) we have plenty to hand out from the public purse into private hands. The hypocrisy is astounding. And, as FUSOI says, the largest amount of private hands have been the already-well-off. This is a typical mechanism in Britain enabling the rich to get richer while the poor get poorer.

I think it's probably only worth it if you plan to keep the house. But if you want to leave quickly, probably not the best idea.

It's pretty much the only way we will ever own a home, and be paying less per month than we will on renting. It's really sad the country is this way now.

Plenty going on on the social housing side of things too.

www.independent.co.uk/news/uk/home-news/social-housing-landlords-cheated-by-repair-firm-mears-group-tribunal-hears-9085454.html

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I wouldn't have been able to afford a property way back when without Shared Ownership and don't care what naysayers think.

Probably are or know of someone who bought their Council/HA property but you're fussing about a scheme that helps young people who would never get a start if it were up to elders

The first ones of these are now coming back on the market here - and are not selling. They are way, way more expensive than older houses, and the market has gone down lately. but the iwners need to make enough profit to get the 20% loan paid off, so want original inflated orice + 20%, and that is a lit more mobey than the houses are worth .

Got us into a bigger house that expected for a first time buy so I'm happy with it. Going to fix mortgage at the end of the 5 years, then use mortgage over payments to save up to pay the HTB loan back.

I agree I think it’s either a con or a not very well thought out policy (I say this as someone who previously owned a shared ownership property).

These sort of set ups put all the responsibilities on the buyer, but allow the government or Housing Association to hold the cards. You might well have a plan for paying this loan back when you take it out, but what happens when you try to remortgage and can’t because the property has dropped in value, you lose your job, fall sick and can’t work or fall pregnant unexpectedly? Then when you can’t actually afford to pay it back as quickly as expected the interest rate starts racking up making it unaffordable to stay in your home.

With shared ownership (often flats) you have to pay rent and service charge to the Housing Association. You have no control over them increasing these costs. If they get too much for you you can’t just move as you could if renting. You have to try and sell, but they make that hard too, by putting a lot of extra barriers in the way.

We had a shared ownership property and had to move house as our jobs moved. This was during the height of the last recession when there was mass unemployment in our area. We tried selling and after 6 months of not selling and it having used up all our savings we asked our Housing Association if we could rent our flat out while it was up for sale as it was unaffordable renting by our new jobs and still paying for our shared ownership property. They said no as making money out of the property goes against the values of shared ownership. We explained we would make less than the rent, mortgage and service charge but they still said no.

Then we asked if we could sell it back to them they said no. They said if we couldn’t afford it the bank would eventually foreclose. They basically didn’t give a sh*t. The only thing theY told us was that we could staircase to 100% ownership and then sell it to anyone as it wouldn’t be shared ownership anymore. We borrowed money from family to increase our share to 100% to do this. Our monthly costs actually went down as the mortgage on whole property was less than paying 50% rent and 50% mortgage.

When selling our Housing Association wanted approval of who we were selling to eventhough we were selling it as 100% ownership and not shared ownership, they wanted us to pay for a formal property valuation from a surveyor which they then had to approve. They also set our asking price and had to agree the sale price when we eventually got a buyer after nearly 3 years. They also had to approve any adverts with estate agents and on Rightmove. They also tried to stop our sale at one point as they felt the buyers ‘didn’t meet with the principles of shared ownership’ as it was parents buying it for their son and not someone who would have been eligible for shared ownership. Our property was not shared ownership at this point as we had staircased to 100% ownership!!!

We had to pay THEIR legal fees as well when it did sell. We had to pay 2.5% of our sale price into a sinking fund as well. They were basically a*seholes and any loophole or small print in initial contract they could use they did. They seemed to be very concerned about the thought of someone making a profit from shared ownership as they kept on telling us that shared ownership was not for people to make profit out of, eventhough we kept on telling them that we were making a huge loss and had even had to borrow money from family.

When living there we paid in full on time every month and made no complaints or anything, they had no reason to treat us this way. I’ve heard from other residents that they were treated this way too. In the end we had to borrow money from family to be able to sell the property at a significant loss and to pay for all of these extra fees. It was worth it to be free of the control of the Housing Association. We were both on good salaries by that point and it still nearly financially broke us.

To anymore considering the loan scheme or shared ownership I would say please, please don’t do it. There are too many financial pitfalls that are not advertised. There are so many downsides to these schemes. It might seem like you HAVE to buy now or never at all, but really being a part of these schemes have so many negatives you will only benefit in the long term if you have been very lucky

It worked really well for us.

Got on the ladder with just 10k deposit. Property values increased so we decided to pay the 20% back after 3 years to get rid of it.

I think it will be hard for some people who haven’t factored it in as much as they should and have borrowed on the higher end of the scale.

Sorry I meant to anyone considering these loans schemes

We sold our shared ownership house (sentinel) two years ago and it was so stressful. We wanted a new kitchen and although bank approved, Sentinel said no. Fine we'll sell up and move somewhere else. Got the house valued (also had to pay for Sentinel valuer to come out and hope he agreed with estate agent). So far so good, we then find out we have to sell within three months or the valuer would have to come back out (at cost to us). In the end and after numerous viewings, Housing association came out and offered us 10k under asking. we accepted as we couldn't see us getting asking price.
The whole sale process was a frikkin nightmare though and we and our estate agent/solicitors had to chase most things with the buyer as they dragged their heels.
To be fair though, it was the only way we were going to get on the housing ladder and that's the problem most people have these days

Ah yes DobbLovesSocks I forgot about the renewing it every 3 months. Our Housing Association (Riverside) told us to help us out they would let us get the valuation survey redone when the property sold, so we only had to do it twice.

I agree OP.
I know someone who is in a shared ownership flat. She has to sell due to bereavement and is really struggling to sell the property for nearly £200K more than the local market price. She has to sell at the full price to pay back her share and the mortgage.
It is a big scam. Just like the PFI scam for building hospitals.

We looked into this when we bought our second house a couple of years ago. We already had a small child and were planning another so no likelihood of additional income 5 years down the line and we had negative equity on our first home after the 2006 so quickly saw the negatives for us but was easy to be drawn into the idea that we could buy something more expensive than our budget.

There are loads of new build round our town so we visited a few developments and quickly found they were charging 30%-40% more than older houses of the same or bigger size. One builder told us almost the entire estate was bought under help to buy, lots of young couples swayed by modern kitchens and en suites. A few have already come onto the market again, optimistically priced above original buying price, but over time get reduced further and further and the few that have sold have gone for less than the original price.

I feel really sorry for people who didn't realise the potential risks and may be stuck there for a long time

I think it also depends on the area in which you live as to whether it is value for money or sensible. Its okay a mortgage advisor saying they "don't like them" - that will be the same advisers who pushed people towards endowment or interest only mortgages years ago. Alongside colleagues who took out 110% mortgages with Northern Rock who laughed at me for taking out a repayment mortgage with the conservative Nationwide. I think there is a scandal per decade in the house buying sector.

My dd bought via Help to Buy because she was paying £550 per month for a 2 bed terrace to rent, whereas a good sized three bed semi with small garden had a monthly repayment of £500 on the scheme. They are both happy with it and I was pleasantly surprised.

They could never have achieved a 10% deposit, but got the 5% deposit together by using the government isa, small savings and selling their car. It can work in low cost areas of the country but certainly not in high cost. The key to the housing market is the first time buyer as without them nothing moves. Not for everyone but good for some.

Shared ownership worked really well for us. But then we were out less than 5 years after buying. Gave us a step up when we needed it!

We have help to buy, will hit the 5 year mark in May - have been overpaying so our equity more than allows us to remortgage to cover the 20% with a remortgage. Our 3 bed detached was £160k, so our help to buy was £32k - house is still valued at £160k so we will pay back the same as given.

The frustrating part they don't tell you about it all the additional fees - solicitors fees, £250 admin fees, Surveyors fees.