Help To Buy scheme. Good or Bad?

phil675 · 30 Sep 2013 at 11:29

Might not be so bad around here where a 3 bed is 100k-130k. We're in a council flat right now with very cheap rent compared to private places, so it might be better to just keep saving and go the usual route.

Glaucus · 30 Sep 2013 at 11:31

Brought forawrd? Is this the new buy scheme or any house scheme?

I think its bad, it just helps raise the price as well as silly lending.
Could do with house prices stagnating for 10years and bring them back to like 3.5xwage or what ever it use to be.

As that isn't going to happen, i will be applying for the any house scheme and see if i can get a mortgage.

Zatoichi.uK · 30 Sep 2013 at 11:37

Me and the misses have managed to save around 40k between us and are looking to buy for around £240k with 40k as the deposit. Not really sure if its a good idea or not at the mo seeing as we can't quite get a house in an area we like. A compromise has to be made on either the area or the house.

A guy who lives opposite me in our current flat was arrested for murder last week. It's a nice place....

phil675 · 30 Sep 2013 at 11:40

Zatoichi.uK said:
Me and the misses have managed to save around 40k between us and are looking to buy for around £240k with 40k as the deposit. Not really sure if its a good idea or not at the mo seeing as we can't quite get a house in an area we like. A compromise has to be made on either the area or the house.

A guy who lives opposite me in our current flat was arrested for murder last week. It's a nice place....

I agree, there are cheap houses out there but in the really awful areas.

jrodga2k5 · 11 Nov 2013 at 19:15

Time for holy thread revival on this...

anticonscience said:
I'd love to take advantage of this.

Only problem is with a dodgy credit history (all now sorted and paid off and no debt for the last 6 years) I doubt I would get accepted for a mortgage in the first place.

That sucks mate but after 6 years if you've built things up again then you may well be ok

Decision is mainly based on affordability and are you a risk etc.

So anyways, I've just applied for the scheme, albeit in Scotland and should hear back within 5 working days. Hopefully it will all go through no problem at all however when reading the case studies it really makes you think.

Doing this a joint application with my brother where we don't have enough of a deposit to take advantage of a very good rate from my employer (Work with a bank). They work it back as being the mortgage cannot be higher than 45% of your disposable income and between us it works out around 17% so that's fine but they could turn round and say you can afford this without help.

It was all very simple in terms of the application process however which was simply an online application form, fill it in, 5 working days before you get either an authority to proceed or a rejection.

Will let you know how it goes either way

mame · 11 Nov 2013 at 19:49

I know someone who has just bought a house and looked into this. He said that it all sounded good until he learned that the 1.75%, increasing by 1% higher than RPI each year doesn't pay anything off the loan, that's just the fee/interest. Not looked into it myself but that's how he understood it.

Glaucus · 11 Nov 2013 at 19:50

mame said:
I know someone who has just bought a house and looked into this. He said that it all sounded good until he learned that the 1.75%, increasing by 1% higher than RPI each year doesn't pay anything off the loan, that's just the fee/interest. Not looked into it myself but that's how he understood it.

Thats a totally different scheme.

This one has no loan.
You simply have a 95% mortgage.

MrMoonX · 11 Nov 2013 at 19:59

phil675 said:
Might not be so bad around here where a 3 bed is 100k-130k. We're in a council flat right now with very cheap rent compared to private places, so it might be better to just keep saving and go the usual route.

If you're in social housing it's hypocrisy to use it when clearly you can afford to privately rent :rolleyes:

if you're saving give up the council flat for someone who actually needs it

This scheme doesn't help people get on the housing ladder, it will help drive up prices and people take out bigger mortgages. The only thing that will save the housing market in this country is to build more houses that don't cost the earth

Scotty123 · 11 Nov 2013 at 20:09

Seems bad. I'd rather own a house I can actually afford.

It should be on my own hard work and success, rather than government involvement.

jrodga2k5 · 11 Nov 2013 at 20:10

mame said:
I know someone who has just bought a house and looked into this. He said that it all sounded good until he learned that the 1.75%, increasing by 1% higher than RPI each year doesn't pay anything off the loan, that's just the fee/interest. Not looked into it myself but that's how he understood it.

I think Krooton explained it best to be honest...

krooton said:
It isn't as much a loan as it is them owning a percentage of the property. Yes the percentage is fixed, but that includes if the value of the property drops. If you cannot afford the total deposit and mortgage requirement for the property, this is totally worthwhile.

Actually, the interest doesn't go up linearly like you think.

It starts at 1.75% (way lower than any mortgage offerings). Each year it rises by the RPI + 1%. That is not additive.

So if the RPI is 3%, your new interest rate will be 1.75x1.04 = 1.82%

It would take either many years, or significant rises in RPI for it to start to match average mortgage interest rates.

As a user of a similar scheme from 2010, it is great for people who want to get on the ladder but cannot save up the deposit. The only real problem is inflating of prices due to lack of supply. Still cheaper than renting though!

Plus you can reduce the government stake by purchasing 5% increments back once a year if you wish. My hope if in the position is to have the stake reduced to at least 10% by the end of the 5 year term, all going well of course.

FoxEye · 11 Nov 2013 at 20:14

Bad as everyone has already said. House prices are already artificially inflated (just as the lenders and their pet politicians like it), and this will cause even further rises.

Economists are broadly against it and are warning of the dangers...
http://www.iod.com/influencing/pres...g-market-needs-help-to-supply-not-help-to-buy

Who is in favour? Take a guess. The people who stand to make money from it.

You just *cannot* trust the government to make policy that is in the public interest. Policy is made for those who pay the ~~bribes~~ party donations, or will offer them a job after their stint in government is over. Corrupt from top to bottom, to the core, and not getting any better any time soon.

Lima · 11 Nov 2013 at 20:25

pitchfork said:
Tories are using broken window fallacies to help boost to economy.

Help to buy scheme is crap, it's just going to flog crappy new build houses to people who can't afford to buy a house (If you can't scrape together a deposit, you aren't reponsible enough for or aren't in a financial position to own a house).

Really? How amazingly naive....

I currently live with my fiancée and our joint income is £58,000 a year. We would like to buy a modest 2 bedroom house for about £250,000 (standard price where I live). Without the help to buy scheme we would need 10% deposit (£25,000) + stamp duty (£2,500) + mortgage/ survey fees etc say (£2,500). So.... I need as a minimum £30,000 cash in the bank. Our rent is £950 a month and when you add up rent, bills, food you get a figure of about £1,800....this figure doesn't include cars/ travel plus other stuff.

Bottom line is....its next to impossible for young people that are stuck renting to save for a deposit to buy a house. I'm more than responsible enough to have a mortgage, and I could comfortably afford the monthly payments, but I need about 6 years of very high savings to barely scrape a deposit....and there lies the problem...

Out of curiosity what job do you do and how exactly did you get on the housing ladder?

I know there are potential problems/ risks for the economy as a whole as a result of this scheme, but it really does serve a good purpose to many young hard working people that are desperate to own a property and stop ****ing money away renting.

scorza · 11 Nov 2013 at 20:25

This is a terrible scheme - it's lazy, unimaginative and dangerous. I was looking at new build properties but why would I spend £300k on a property without H2B when other people with the same buying power as me will be moving into £400k properties with H2B. People are being pressured into using this scheme and going into even more debt because they need to keep up with the Joneses. Furthermore, house builders are already putting up prices, one sales agent was trying to flog me a house for £325k by telling me the next wave of this type of house they release will be £340k. He could have been trying the hard sell but since I made it clear I wasn't in a position to buy yet he must have known he was wasting his time. That extra £15k goes straight into the house builder's profits, which may or may not be re-invested in more builds but my main thought here is that they obviously thought they would make a satisfactory profit selling this home at £325.

In summary: :mad:

scorza · 11 Nov 2013 at 20:28

jrodga2k5 said:
I think Krooton explained it best to be honest...

Plus you can reduce the government stake by purchasing 5% increments back once a year if you wish. My hope if in the position is to have the stake reduced to at least 10% by the end of the 5 year term, all going well of course.

Surely you'd be better overpaying your mortgage than paying back H2B? I haven't done the maths but it seems like H2B is a lot more generous than a mortgage.

Hilly · 11 Nov 2013 at 20:32

it's good for those which want to buy and haven't got the full deposit but can easily afford a mortgage.

Downsides are they are for new builds which are more expensive and generally aren't as good a property.

I went with HomeBuy Direct (same scheme, different name) in 2010.

OpenToSuggestions · 11 Nov 2013 at 20:34

It is a bad idea, because people who could not get on the ladder can now do so, so the bottom end of the market will increase in price.

To me, it is good though, as I bought in May 2013 before this 'help to buy' nonsense came out.

I'm going to go ahead and make a generalisation here about the midlands and the north - 50% of 25-35 year olds can afford a home, yet they state they cannot afford it, however they have an iphone 5S, near-new car, two weeks in Barbados every year, £40 T-Shirts.....and so on.

Yes for some people house prices are mental -London, Cambridge etc., but when houses near me in Stoke On Trent in an average area start at £90,000 I simply don't get how a 35 year old can still live with their mum. It is all about where your priorities lie and that is fine, but those who live the fancy lifestyle then complain about housing require a slap. I could have an M3 right now on finance and still live with my parents

.

Back on topic - A housing bubble is quickly emerging! I don't see how lending people money who cannot save a deposit together is a good idea.

Glaucus · 11 Nov 2013 at 20:35

hilly said:
Downsides are they are for new builds which are more expensive and generally aren't as good a property.

Thats the old scheme, im pretty sure the op, will be talking about the new help to buy scheme, seeing as he says cameron and the date its posted.

Which is any house, new or old. Its just a 95% mortgage, no loan.

http://www.natwest.com/personal/mortgages/help-to-buy.ashx

FoxEye · 11 Nov 2013 at 20:39

OpenToSuggestions said:
Yes for some people house prices are mental -London, Cambridge etc., but when houses near me in Stoke On Trent in an average area start at £90,000 I simply don't get how a 35 year old can still live with their mum. It is all about where your priorities lie and that is fine, but those who live the fancy lifestyle then complain about housing require a slap. I could have an M3 right now on finance and still live with my parents .

There's nothing in Cornwall below £180k. Unless you want to live in an area with massive drug and violence problems. Most properties in areas where you won't be killed are £200k+

So it's not just London, Cambridge, Oxford

OpenToSuggestions · 11 Nov 2013 at 20:42

FoxEye said:
There's nothing in Cornwall below £180k. Unless you want to live in an area with massive drug and violence problems. Most properties in areas where you won't be killed are £200k+

So it's not just London, Cambridge, Oxford

Yeah the South prices are crazy! I can only comment on the Stoke area really!

What shocked me the most is I am fixed for 2 years @ 90% LTV at 4.15%, yet every 95% LTV I have seen in adverts was 5.5%+ It is scary to think of an interest rate of over 5% over the base rate.

AndrewNR · 11 Nov 2013 at 20:56

OpenToSuggestions said:
It is a bad idea, because people who could not get on the ladder can now do so, so the bottom end of the market will increase in price.

To me, it is good though, as I bought in May 2013 before this 'help to buy' nonsense came out.

I'm going to go ahead and make a generalisation here about the midlands and the north - 50% of 25-35 year olds can afford a home, yet they state they cannot afford it, however they have an iphone 5S, near-new car, two weeks in Barbados every year, £40 T-Shirts.....and so on.

Yes for some people house prices are mental -London, Cambridge etc., but when houses near me in Stoke On Trent in an average area start at £90,000 I simply don't get how a 35 year old can still live with their mum. It is all about where your priorities lie and that is fine, but those who live the fancy lifestyle then complain about housing require a slap. I could have an M3 right now on finance and still live with my parents .

Back on topic - A housing bubble is quickly emerging! I don't see how lending people money who cannot save a deposit together is a good idea.

Even your example of a £90,000 would require £13,500 deposit on an 85% mortgage. I wouldn't say £13,500 can be saved overnight, especially if the "35 year old" isn't with mum and dad but is renting.

I think the scheme is good as it helps those who are not "cash rich" be able to pay for a house of their own rather than line somebody else's pockets.

Outside of London/Cambridge/[other sought after places) I don't think the prices have significantly changed much in the last 5 years. We bought in 2009 after the 'crash' and since then the value of our house has perhaps gone from £160k to £170k, which I think is less than inflation each year.

The majority of people moaning are those that live in London and can now only afford a 1 bedroomed house because prices have gone through the roof in the last few years (probably due to outside investments).