Budget 2021: Mortgage guarantee to help buyers with 5% deposit

Scam · 8 Mar 2021 at 21:59

Richie said:
What if there was a tax on the "profit" of a house? e.g. Buy a house for £200,000 and then, 5 years later, sell for £250,000 so you pay a tax on the £50k difference

This has been suggested elsewhere (I think I posted it here) and it's a great idea. No reason not to.

People with savings get them taxed twice, yet if you were fortunate enough to buy a house back in the day you're entitled to mega profits? Crazy. Like the example of the couple in a house on my street that bought it in 2006 for £760k and just sold it for £1.7m. So they made a net profit of £940k. What's worse, over those 15 years that works out as nearly £65k/year. Bricks and mortar earning more than average workers.. what a world we live in :rolleyes:

HACO · 8 Mar 2021 at 22:01

Richie said:
What if there was a tax on the "profit" of a house? e.g. Buy a house for £200,000 and then, 5 years later, sell for £250,000 so you pay a tax on the £50k difference

Or have a stamp duty on the sellers for houses above a certain value.

These may have the effect of prices being controlled?

Capital gains tax exemption from property sales has to go away. We also need annual property taxes, like many many other countries.

Scam said:
People with savings get them taxed twice, yet if you were fortunate enough to buy a house back in the day you're entitled to mega profits? Crazy. Like the example of the couple in a house on my street that bought it in 2006 for £760k and just sold it for £1.7m. So they made a net profit of £940k. What's worse, over those 15 years that works out as nearly £65k/year. Bricks and mortar earning more than average workers.. what a world we live in

Most people who bought around or before 2005 have made more money from property growth than their salaries over the last 15-20 years. All of that tax-free too.

DireEmblem · 8 Mar 2021 at 22:06

The 95% mortgages are an odd one. On one hand, it means people don't need to save up as much to help get themselves on the housing ladder, but then could it also prop up housing prices? If you completely remove it, then it makes it more difficult/longer before new buyers could get on the market I guess.

I think when you apply for your mortgage, the rent you have paid in the past should count. If you have been able to pay £650 a month, on time for the last 3-5 years, and your mortgage is < £650 a month - there should be less risk for the lender, right?

Should mortgage providers also have an obligation to help ensure people don't over extend themselves? How many people don't have an 'emergency fund'? The fact someone has an 'emergency fund', should also count towards a mortgage application as well. This may also make it more difficult to get on the housing ladder, but could be offset if the mortgage is less than the rent they have been paying on time, and the applicant puts the difference aside to help build an emergency fund as part of the deal.

The other thing - the borrowing limit. Is the upper end of the 3-5x salary too much?

MissChief · 8 Mar 2021 at 22:32

DireEmblem said:
The 95% mortgages are an odd one. On one hand, it means people don't need to save up as much to help get themselves on the housing ladder, but then could it also prop up housing prices? If you completely remove it, then it makes it more difficult/longer before new buyers could get on the market I guess.

I think when you apply for your mortgage, the rent you have paid in the past should count. If you have been able to pay £650 a month, on time for the last 3-5 years, and your mortgage is < £650 a month - there should be less risk for the lender, right?

Should mortgage providers also have an obligation to help ensure people don't over extend themselves? How many people don't have an 'emergency fund'? The fact someone has an 'emergency fund', should also count towards a mortgage application as well. This may also make it more difficult to get on the housing ladder, but could be offset if the mortgage is less than the rent they have been paying on time, and the applicant puts the difference aside to help build an emergency fund as part of the deal.

The other thing - the borrowing limit. Is the upper end of the 3-5x salary too much?

There really should be a system or method for this to be taken into account. If I can pay £650pm on time for three years, and £500pm for the eight years prior to that with my previous Landlord without missing a single payment, I can pay half of that towards a Mortgage without even breaking a sweat and will likely keep the payment the same to overpay. A £100k mortgage with a £25k deposit (in my dreams!) would be £300pm or thereabouts, less than half!

HACO · 8 Mar 2021 at 22:44

DireEmblem said:
The 95% mortgages are an odd one. On one hand, it means people don't need to save up as much to help get themselves on the housing ladder, but then could it also prop up housing prices? If you completely remove it, then it makes it more difficult/longer before new buyers could get on the market I guess.

I think when you apply for your mortgage, the rent you have paid in the past should count. If you have been able to pay £650 a month, on time for the last 3-5 years, and your mortgage is < £650 a month - there should be less risk for the lender, right?

Should mortgage providers also have an obligation to help ensure people don't over extend themselves? How many people don't have an 'emergency fund'? The fact someone has an 'emergency fund', should also count towards a mortgage application as well. This may also make it more difficult to get on the housing ladder, but could be offset if the mortgage is less than the rent they have been paying on time, and the applicant puts the difference aside to help build an emergency fund as part of the deal.

The other thing - the borrowing limit. Is the upper end of the 3-5x salary too much?

Given that we had 100% mortgages and 7x salary multiples in the 2000s and we all know how that turned out with banks issuing subprime mortgages and then betting on those securities to fail, I'd say these restrictions are rather reasonable.

Whether a bank wants to issue subprime mortgages should be up to them, but there shouldn't be any bailout if it all collapses. We should just separate commercial banking and mortgage securities and then allow mortgage securities to be wiped out if they mess up.

413x · 8 Mar 2021 at 23:21

Problem with taking rent into account is, that doesn't matter to the banks.

They don't want to lend you more than you can pay. A deposit helps reduce negative equity chances
4.5x salary helps buffer interest rate rises.

Really. The banks are spot on with lending criteria.

413x · 8 Mar 2021 at 23:25

Scam said:
This has been suggested elsewhere (I think I posted it here) and it's a great idea. No reason not to.

People with savings get them taxed twice, yet if you were fortunate enough to buy a house back in the day you're entitled to mega profits? Crazy. Like the example of the couple in a house on my street that bought it in 2006 for £760k and just sold it for £1.7m. So they made a net profit of £940k. What's worse, over those 15 years that works out as nearly £65k/year. Bricks and mortar earning more than average workers.. what a world we live in

I also suggested this.

Problem is renovation etc. You just wouldn't do it.
Really. It sounds ideal.. In an ideal world. Prices wouldn't rise at all. But what would they be set at?

Profits should be heavily taxed for sure. I'd be completely happy to not make profit on my home. It would help with upgrading to the next stage too.

Trusty · 8 Mar 2021 at 23:42

413x said:
I also suggested this.

Problem is renovation etc. You just wouldn't do it.
Really. It sounds ideal.. In an ideal world. Prices wouldn't rise at all. But what would they be set at?

Profits should be heavily taxed for sure. I'd be completely happy to not make profit on my home. It would help with upgrading to the next stage too.

How much tax though? 80% on profits? 50%?

HACO · 8 Mar 2021 at 23:54

Trusty said:
How much tax though? 80% on profits? 50%?

Same as any other capital gains tax.

Trusty · 8 Mar 2021 at 23:59

HACO said:
Same as any other capital gains tax.

20% isn't heavily taxed though

413x · 9 Mar 2021 at 00:13

Trusty said:
How much tax though? 80% on profits? 50%?

Probably more like 50.
You need people to actually spend money on houses so you need some incentive

Trusty · 9 Mar 2021 at 00:16

413x said:
Probably more like 50.
You need people to actually spend money on houses so you need some incentive

Would you be ok with 50% tax on your crypto profits?

moon man · 9 Mar 2021 at 06:20

This house I bought not many years back has rose maybe 25k a year, but when it was for sale there was no interest from generation netflix or whatever they are as it needed some work (big garden overgrown, outbuilding doors stuck, nothing a below average diyer couldn't do)
People wanting cgt on primary residences and tax is just sour grapes, they just need to pull there finger out, my house was well within reach to a minimum wage earner

Mekrel · 9 Mar 2021 at 06:49

moon man said:
This house I bought not many years back has rose maybe 25k a year, but when it was for sale there was no interest from generation netflix or whatever they are as it needed some work (big garden overgrown, outbuilding doors stuck, nothing a below average diyer couldn't do)
People wanting cgt on primary residences and tax is just sour grapes, they just need to pull there finger out, my house was well within reach to a minimum wage earner

Anecdotal post is anecdotal. You can't simply state that it's about pulling your finger out because the maths don't lie - in a lot of cases the multiplier you'll be leant on your annual wage doesn't get you anywhere near to an entry level property, meaning you need a substantial deposit. If you're an average wage or lower, saving for a deposit whilst renting is very hard.

Now, before anyone chimes in - I own my flat and my wages are significantly above the average, but it doesn't change my opinion on how unachievable it is for those with a lower income than myself.

Case in point: Where I live which isn't a glamorous town by any stretch of the imagination, studio apartments are going for £200K. If you're on average wage of £30K a year that's going to require an £80K/40% deposit if a bank will only lend 4x. Let that sink in for a moment, that's an average earner in the UK struggling to get into a studio apartment, and the average wage for this county isn't that much higher some sources have it the same as the UK average and some say it tops out £10k higher.

It comes to something where people are willing to bury their head in the sand that there's an issue with house pricing in the UK. I mean, our government is having to put support schemes in place such as FTB ISAs and HTB equity loans (some of which aren't actually helping, but making the issues worse). Are we saying we expect average earners to have to apply for social housing, as they're the sort of properties that are cheaper than the £200k studio flats? If average earners can't get on the ladder then those worse off/below the average and truly screwed.

moon man · 9 Mar 2021 at 07:38

At the time I paid a shade under 100 k I'm sure that was achievable to a ftb but it didn't get attention, there's a couple I know renting for £850 but also newish bmws each and moderately lavish lifestyles yet they say ownership is out of reach.
I'm low paid but know how to do this, but yep most won't, that just gives us that do more opportunity's

builder22 · 9 Mar 2021 at 08:23

moon man said:
This house I bought not many years back has rose maybe 25k a year

moon man said:
At the time I paid a shade under 100 k

You’re either delusional about the value of your house or extremely lucky/right place right time with the purchase and don’t realise it’s almost a one off scenario
It’s not like you can just go buy a 100k property that needs a bit of TLC and it will increase 25% a year!
Can you??

413x · 9 Mar 2021 at 08:39

moon man said:
At the time I paid a shade under 100 k I'm sure that was achievable to a ftb but it didn't get attention, there's a couple I know renting for £850 but also newish bmws each and moderately lavish lifestyles yet they say ownership is out of reach.
I'm low paid but know how to do this, but yep most won't, that just gives us that do more opportunity's

Also. How long ago is this?

413x · 9 Mar 2021 at 08:40

Trusty said:
Would you be ok with 50% tax on your crypto profits?

I just wouldn't do it. Besides crypto is accessible with 1 pound.
The property market isn't accessible for millions. Taxing to make that accessible is perfectly reasonable.

At some point home ownership will be so low that people will vote in a party that causes a house price crash.
Or it will be so low it will crash on its own. Or like Japan where it just declines.

When? Who knows. But these price increases are unsustainable

HACO · 9 Mar 2021 at 08:54

moon man said:
This house I bought not many years back has rose maybe 25k a year

moon man said:
At the time I paid a shade under 100 k

Sounds like a great argument for capital gains tax. And proving the point that people are making more from their property growth than from salaries, tax-free.

HACO · 9 Mar 2021 at 08:56

413x said:
I also suggested this.

Problem is renovation etc. You just wouldn't do it.
Really. It sounds ideal.. In an ideal world. Prices wouldn't rise at all. But what would they be set at?

I mean, it's simple enough to make renovation spending tax-deductible, and that's completely fair too. You buy for £200k, spend £20k and then sell for £300k, pay tax on £80k rather than £100k.

413x said:
Profits should be heavily taxed for sure. I'd be completely happy to not make profit on my home. It would help with upgrading to the next stage too.

Yeah, we need more of this attitude (through policy). When people buy a property, they should be buying a home rather than a vehicle to increase their wealth by making younger generations poorer and poorer for it.