Good or Bad: Subsidy to house buyers in Budget?

[lljkk]

Here.

Does anyone else still think that homes are too expensive to buy, and that these measures will artificially keep prices high?

Care to convince me otherwise?

It is indeed a mad bad and stupid idea.

It is not a subsidy to house buyers. It is yet another subsidy to banks and house builders. This is all about propping up the building industry and propping up house prices and propping up banks.

Allowing house prices to fall to a level that young people can actually afford to buy them is the market solution. Problem is that Govt and Bank of England are terrified about falling house prices. It would destroy the banking system AND the big house builders if house prices fell and people started walking away from their mortgages in negative equity.

Think Northern Rock x 10.

It's just an extension of the FirstBuy scheme, which is nothing more than a subsidy to large housing developers. It's also still a 95% mortgage, just with part of it deferred for 3 years. There may be a lot of people in trouble when that 20% loan starts being repayable alongside the mortgage.

Housing developers are sitting on loads of land with planning permission but not building because they want to keep the prices of the houses they do build high. And new builds are generally expensive relative to older houses that are not in weird estates with no pavements and road systems that make no sense in the middle of nowhere with no meaningful transport links or amenities.

We looked at some before buying our house and they really weren't a great deal. Teeny tiny bedrooms with layouts that would make them difficult to furnish sensibly; houses that can be described as detached because there is a few inches between them and their neighbours which happens to be an enormous 3 storey monstrosities that will block out all the light for the much smaller house in between them; driveways that you'd struggle to fit a car in; houses that seem to be built on back lanes rather than actual roads, with nowhere to park your car which you'd need because they are miles away from anything and are made almost impossible to navigate because everyone just has to abandon cars all over the place; houses where other people's garages are positioned in such a way that the area immediately in front of your windows and front door is access to their garage, and somewhere they could presumably park their car; houses with bloody giant electricity pylons about 20m from their front doors... And all considerably more expensive than older housing in established areas with amenities and transport links.

The developers are building them very slowly and there are still plenty left unsold on the estates. And the people living on the estates built in the last 5-10 years are really, really struggling to sell their houses if/when they want to. And if they do sell, it's usually at a loss (often quite substantial).

House builders profits were up substantially last year.

At its slow point in November 2008 the shares of Taylor Wimpley were trading at about £0.11 and yesterday were trading at around £0.89. The share prices of house builders have not yet reached all time highs of the boom years but still they have rocketed since the bank bailout and various Govt schemes were first announced.

Makes you wonder why they actually need this additional subsidy.

Oh heavens, I am glad someone mentioned that, weird estates with half pavement/road space that is completely pedestrian unfriendly and nonsensical road systems and only the tiniest garden spaces. I cannot conceive who thought that was a good idea!!

Back when govts first started subsidising house purchases for key workers it was incredibly controversial with claims that it would drive up house prices. Now no one seems to bat an eye if govts keep house prices artificially high.

It's up to 600,000. Where, other than Pimlico/Knightsbridge is it going to cost that amount to get on the housing ladder? It's a joke and designed to accommodate buy to let landlords and those with second homes.

Sky is just about to talk about this. Osborneunder pressure from Labour who are saying it wil just help wealthy second home owners.

I am buying a house and will definitley take advantage of it if I can.

It's one of the stupidest things George Osborne has done yet, and they are crazy if they think it will make them popular. The public mood has turned on the desirability of high house prices.

My understanding of First Buy and similar is that they are not a subsidy as such. The buyer puts down a smaller deposit (5%) than the high street currently requires, has to meet the usual lending criteria such as credit scores and proof of income, pays the mortgage back in the usual way (interest rates about 4.5%-5%) and the government involvement is to act as part guarantor in the event of a default. Think they cover 20% of the loan. If the homeowner doesn't default, no government money is involved.

So I'm not seeing 'subsidy'... stand to be corrected.

There are a number of different schemes, cogito, what you're describing is New Buy. First Buy involves a loan of 20% from both the builder and the government plus a deposit of 5% that you've stumped up yourself. DH and I actually looked at doing this, but ruled it out because a) new builds are shit and over priced and b) new builds are shit and over priced.

Me and DH were discussing this because we are in a flat too small for our needs and would be a second time buyer we think the scheme is ridiculous and don't want to be a part of it. We would rather stay put

I agree with lots of posts on this thread - it's just another naked attempt to keep house prices high and hand more money over to the banks. Isn't it going to cost something in the region of £1.3 billion? Couldn't that money be spent on letting the housing market find its natural level (ie NOT with the average house costing 7x the average wage), let people get into negative equity and then compensate the banks when they do so.

Gosh, arbitrary username, are you in birmingham? There is an estate just like that not far from me. The estate is full of cars parked everywhere because the drives aren't big enough and there are a number of the ugliest electricity pylons there with houses looking straight onto them. I can't imagine why anyone would want to buy a house there.

House prices need to fall so that our young people can buy houses. Together with the phenomenal student loans they will have I could weep when I think about it.

No. I'm nowhere near Birmingham. The sad truth is that so many new build estates are exactly as I've described.

I've read two worrying things about this scheme

1. You might be unable to repay the loan until you have paid ff your mortgage (unless the house is sold)

1. After 5 years an interst rate is charged which increases each year

So it might be a cheap mortgage to begin with but could end up trapping people into repaying large amounts.

Is anyone more knowledgable about the finer details?

orange Details are here

It is just a wheeze to keep house prices high, and the plebs renting off his landowning chums (with their additional 2nd homes).

It's not really just an extension of the first buy scheme, as I understood it anyone and any property (under £600000 ) can apply. For up to 20% (could be wrong though) of the total value (execpt btl mortgages?).

BAD
utterly stupid and will just reinflate the housing bubble.

On Jcee's link it says;

After five years, the equity loan will be subject to a fee (collected from you on behalf of the HCA by the Post Sales HomeBuy Agent) of 1.75% per annum on the outstanding amount of the equity loan. From the fifth anniversary of the loan this fee will increase each year by the increase (if any) in RPI plus 1%.

Does this mean the fee will increase by RPI plus 1% every year so would end up ridiculusly high? I just don't get it...

I think so - judging by the example. So if RPI was 5% the 1.75% starting fee increases by 6% each year. So it could end up pretty high

Further down they give an example where they say APR is 5.2% but that's on an example where the property is sold in year 6 so there have only been one lot of fees repaid. Those APRs will look a lot worse at say 10 years.