AIBU to think a 2.5% deposit scheme will not help?

[Lugol]

DS told me yesterday about some mortgage scheme the Government have come up with where the deposit is 2.5%.

I'm just wondering how any young people are going to be able to take advantage when the Government have made them virtually unemployable and there are no jobs.

Surely if they want young people buying houses, or anyone buying houses for that matter, then the Government need to create an environment where people can afford to.
The CoL is off the charts and only getting worse if this 25% increase in energy costs is going ahead in January. Fuel at the highest it's been.
The housing market is totally stagnant.

They keep building whole estates of houses (not even starter houses either) and I keep wondering who the fuck is going to buy them.

Because it's not young people.

YABU - Don't be daft Lugol, All of the young people will magically find jobs and buy houses
YANBU - the country is fucked

The government know it’s unaffordable which is why the deposit required under this new scheme will be 22.5%, not 2.5%.

Yes it would if there were 2 of them - but on £2800 take home a mortgage of around £1400 plus £450 service charge plus bills on his own would be a chronic struggle - and as that’s cost for a 1 bedder it’s not as if he can have someone else in- at the moment he pays £1475 rent (including bills ) sharing with 1 other in Belsize Park and it’s all his stuff in it so feels like home - I can understand his reluctance to move to somewhere not that pleasant or necessarily safe to also have no money - I can see this may work ‘if’ long term with a partner , getting a2 bed and can get one with modest service charges in an ok area- in the more pricey areas though it would make sense to bring back DIYSo as mentioned above - he could then buy a 2 bedder shared freehold somewhere like Beckenham or Enfield or Bromley and get someone in to share costs until paired up ( he’s 28) the other option is to cut all these shared ownerships and simply build lots of 1 and 2 bed £850 to £1400 pads built to rent - give the insurance and pension companies massive tax breaks to build but gvt set rents depending on location -

They're just trying to prop up the cash cow that is the mortgage industry. Money is circular in this country, we don't generate money, we just sell each other overpriced houses and buy coffees.

I wouldn't be surprised if next step is generational mortgages or some other bullshit.
The housing market needs to be allowed to naturally stall out. There is stagflation but house prices aren't in line with where they should be since interest rates went up hugely. I know the government wants to prompt more money flowing through house selling but everything they do/suggest, whether it's 2.5% mortgages or stamp duty holidays, is inflationary. But then again inflation erodes their debts....

I think another issue certainly in certain areas is that a lot of people gravitate to the same areas that they perceive as nice and where there are still jobs and services , which is quite understandable , meaning that prices have gone up exponentially in these areas and competition is high , whilst prices remain a lot less robust in other areas that are not necessarily where many would pick - and very often become full of mainly older adults who aren’t out there moving every 2 minutes. Which is why as an example you can end up paying London money in Bristol or here in Bath or St Albans or Winchester but get a perfectly decent house for a third of the money in Lincolnshire or Shropshire. Problem is though whilst our young people could get houses in these areas, they need the jobs to go with it and my son and I’m sure other peoples adult kids just wouldn’t go for it as they think it’s dull, old and lifeless — regardless of house prices- we rent nice houses and there’s no way I could persuade my husband to do this either , so that’s probably rubbed off on our son too -it sounds snobby I know but I do think people’s lifestyle expectations have changed, especially if you aren’t brought up in these cheaper areas and have zero connection to them -

It will help some people. Especially those who buy somewhere that they stay in for a long time.

Agreeing though that it does not reduce house prices, nor create more houses. End short term lets, make the house sale and purchase system better (Scots law applied in England and Wales one option), reduce second homes and bring empty shops conversion.

I think govt support for new builds is a problem, considering the insurance industry doesn't plan to cover all of them for floods. So who is left - oh yes, the govt (taxpayers) will have to cover the houses, long after the developers have pocketed the money.

https://www.bbc.co.uk/news/articles/c60qxk288e57o

And people are so focussed on Gaza/Israel that they won't collectively take to the streets and lobby the Government to do something about it.

You are straw-manning all over the place.

That’s because the system isn’t designed for single wage earners. When women entered the workforce en masse, and started earning more equal pay, house prices adjusted accordingly, so they are now based in two incomes.

If you have a million extra people coming into a country each year (which is what happened under the Tories, known as the "Boriswave"), you will need more homes. It's basic economics of supply and demand. The UK has had more immigration in the past 30 years than in the previous one thousand years before that. That's going to put just a tiny bit of pressure on housing and make any housing crisis much much worse.

I'm not sure it will have a huge impact, but it's not a bad idea.

A very large proportion of first time buyers currently get most of their deposit from "the bank of mum and dad". This makes that kind of help accessible to everyone.

In general, subsidies (like this) cause prices to go up, but less than the amount of the subsidy. So sellers get higher prices but buyers get lower prices. Prices go up less if supply responds a lot to price and so does demand. That's why it makes some sense to limit this to new builds. The supply of existing houses won't respond to price, but the supply of new builds may. And if the price of new builds goes down, that is likely to have a knock on effect on existing homes in the same area.

It would be more effective to build new homes directly, but probably more expensive/slow to pull off. And continue to reduce planning restrictions appropriately.

We were looking to buy a house at the time and suddenly every house that was £300k was £500k plus.

Yeah, of course they were. Instant 67% HPI is very common. You are correct in your opinion that the 2.5% deposit won't help but your hyperbole undermines your argument.

I am telling you what actually happened at the time.
It was a nightmare for us because we didn't actually want to spend so much on a house but suddenly the houses in our area were vastly more expensive than they had been.
Anyone who was actually house-hunting at the time will have been through it.

We were renting a house that had chronic damp and my post Covid lung problems meant I ended up in hospital with pneumonia so after that we needed to get out of where we were living.

We actually bid on the house that I mentioned in a desperate attempt to get out of our rented which is why I took interest enough to look at what it sold for. I'm so glad we didn't buy it because it wasn't worth what it sold for and there is now a nice, shiny newbuild estate literally behind it.

The first thing my next door neighbour said to me when I met her was "Your house isn't worth what you paid for it".

You can believe me or not, that's on you, but I'm telling you what happened. 🤷🏻‍♀️

Oh come on, no housing market has suddenly increased 40% 😂

That's exactly what happened when the stamp duty holiday was launched.

That’s exactly when I bought my current house funnily enough 😀

but no, 40% house increases in an entire area would be well documented. It would be in the national news 😂 let’s ask Clyde

Claude even.

they reckon the best is 29% over 2 years

• Nationally: Halifax data shows average prices rose 20.4% between January 2020 and December 2022.
• Strongest region or nation: Wales saw the biggest rise, at 29.3%.
• Strongest towns early on: Land Registry data, looking at the year after the first lockdown, put Liverpool top at 16.7%, followed by Oldham, Burnley and Blackburn.
• Single homes: Zoopla estimated that around one million UK houses rose in value by more than 50% since 2020, though that counts individual properties rather than whole areas.

I didn't find a local authority that hit about 40% over the Covid period. Some smaller, cheaper northern and Welsh markets may have come close by 2022 or 2023, but I haven't verified that. Over a longer window, 40% or more is much more common. If you tell me the period and geography you care about, I can dig into UK House Price Index data for specific local authorities.

You think a stamp duty holiday which on average equates to about 5% of the total value caused a 40% housing price increase?

I also did it. Bought a 4 bed house with a 5% deposit, remortgaged after 5 years to pay off the HTB loan at 20% of the value (which had gone up less than the interest we would have paid). It was a brilliant scheme for us. We've never had to move and 13 years later the mortgage is almost gone.

Agreed. It has its uses so I don't think deserves wholesale condemnation. On rates - the interest rate on a specific HTB mortgage was 3.79% which is not vastly different to now. The cheap rates came later (2018-Liz Truss).

My (admittedly quick) reading if this plan is that the gov will start a loan scheme to give you 2.5% of the property value, which you will add to your existing 2.5% so you have your 5% deposit. So you end up with a mortgage and a loan (and probably a student loan) to pay off. Haven't seen any mention of interest rates or repayment terms for the loan. If my understanding is correct I don't see how that helps. Sounds like the monthly repayments will be crippling.

Happy to be told I've got it all wrong.

No, you put in 2.5% and the government offers a 20% loan, so effectively portions off 20% of the house interest-free. You only pay a mortgage payment/interest rate based on 77.5% of the property value.

After 5 years (at least it was 5 years last time) you can remortgage to pay off the 20% or start paying interest on it.

@Greenlawnbrownlawn The government will lend 20% and the buyer has to find just 2.5%, so the total deposit will be almost a quarter of the property’s value.

Knew I'd scanned it too fast! Thanks for the clarification. DS will be looking to be a first time buyer soon, so this is all of interest.