HTB Equity Re-Boot

[ThankmelaterOkay]

Might come to nothing but I saw the govt are thinking of rebooting HTB equity loans? And this time all properties not just new builds.

Anyone with one can break it down for me?

Can you currently have more than 5%? Say I had 30% deposit, can I get the govt 20%?

The interest is paltry after 5 years right? Ie less than current mortgage rates? So it’s best to just pay the interest?

Can you pay the 20% back in chunks or one go?

does the 20% increase/decrease with property value?

Thanks in advance.

This should answer your questions.
https://www.gov.uk/help-to-buy-equity-loan

In my opinion, if you can afford not to do it, don't do it. I don't know anyone who used the scheme who didn't regret it when they came to sell and make an onward purchase.

Strange to me it looks like cheap money?

1.75% plus RPI + 2% each year. So even if inflation sits at 10%, it’s only 1.75 x 12% each year.

So after 5 years at 10% inflation (aka never in a million years), you hit 3%!

But in the real world you’ll never exceed 2.5% even after years and years.

Albeit, maybe this was a structure created in the time of cheap money. And it is not representative of what they plan to do.

Is the catch that in a rising market they govt are making money, and not you? Otherwise, wouldn’t you just take their money, put it in a fix for 5 years and pay it off after 5 years? Pocketing the 3-5% interest each year?

You don't physically get any money in your account, they give the share directly to the seller via a solicitor and the H2B agent. It's not money in your pocket which you could put in a high interest account. Otherwise the scheme would be open to abuse.

Yes, I know. But if I have £170k as deposit for example. I get £70k off the price via govt, and I hold back £70k of my own money to put in high interest account? Ie using £100k of my own money as a deposit.

If you have £170k for a deposit you don’t need HTB. And it’s not ‘cheap money’ it’s tax payers money!

You also have to remember that you will owe the government 20%, not the amount you borrow. So if house prices go up 10% you will owe 20% of the new amount.

They haven't announced anything yet so I'm not sure it's even worth trying to compare to the old scheme. I will be very surprised if they apply a like for like product for the secondary market, HTB was as much about the construction industry (and shareholders...) as it was FTBs.

The catch is you owe the government 20% of the value of your home at the time of paying HTB back, NOT what you borrowed.

Yeah I’d see it as insurance against house price drop. They’d cover some of the losses.

But no doubt prices will just continue to rise forever above what would be achievable in a safe bond. So yes, it’s best not to take the money and have the full equity growth.

My son bought using HTB in 2019. The amount of the Help To Buy % was increasing rapidly as house prices climbed through the Covid lockdowns.
As it was a new build he put off making improvements such as putting in flooring, decorating and sorting the garden; so that when it was valued by HTB in 2022 the % of the value was as low as possible. Then I lent him the money to pay it off. He had to pay for the valuation and solicitor's fees when paying it off as well though.

Under the old scheme, you borrowed 20% of the purchase price which went straight to your property. This in theory gave you a 25% deposit and opened you up to better interest rates. You have to pay that 20% back on sale of the house or after 20 years. You could buy in 10% increments but the value is what the house is worth now, not when you bought it.

The reason it was on new builds is because they lose value when being sold on anyway (assuming the market doesn’t increase a stupid amount). So people using H2B would forever be trapped in new builds ensuring a forever supply of new builds and developers getting a pass because we need houses. For people who would buy a 2 bed terraced new build and then look to move to a 3 bed older house with the potential to extend 10 years down the line found that after paying the 20% back to the government they wouldn’t have enough to move to the 3 bed. I can the old system working if you buy the very maximum you can afford at the very beginning of your career. So you push yourself to a 3 bed that will see you through 10 years and as your salary increases you save all of it to pay off the loan before house prices rise too much, then move with probably 30-35% of that house and a much higher salary.

The reason it was on new builds is because they lose value when being sold on anyway (assuming the market doesn’t increase a stupid amount). So people using H2B would forever be trapped in new builds ensuring a forever supply of new builds and developers getting a pass because we need houses.

This is complete and utter bullshit. It was to line the pockets of the builder companies sure, and I think it caused issues in London where 40% was allowed, but it has widely successful elsewhere in the country. We used it and have made a substantial profit and paid back less than what we would have paid in interest if we'd had a 90/95%LTV mortgage (whilst also being able to buy before prices continued to increase). Where I am the new build estates have thrived because they've created new desirable communities, I don't know anyone who has gone into negative equity around here, that's not to say it hasn't happened elsewhere, but to state it is to trap people is conspiratorial nonsense, Tories want all houses to increase in price, huge pockets of negative equity would not be good for the overall property market.