Help2Buy judgement day thread

[Psycho Sonny]

You didn't think the government did it to be genuinely helpful, did you?

it's terrible the market is being artificially kept high. it should be based on supply, demand and affordability. however they are propping up the affordability part.

if this keeps going it's only a matter of time before people leave the UK for somewhere where the income matches house prices. because unlike diamonds people can't really live without a home.

 

[Psycho Sonny]

Ultimately - and I realise this may come across as vaguely elitist - it is right and proper that some people should not be able to afford to buy a house, if they are towards the bottom of the wealth pile. Yes they need options for housing but that doesn't mean that every tom dick and harry working in a basic job should be on the ladder in their 20s.

that is just wrong on many different levels.

the poor should be able to buy a flat in a terrible area in their 20's on a basic job no issues.

the problem is they are normally full of single mothers on benefits, etc who can afford to pay higher rent than those working as it's free money to them therefore landlords buy them up to rent out pushing up prices.

going by your elitest logic should we just scrap benefits entirely and let just those that work be able to afford to do anything?

 

[uncle_rufus]

... it depends what you mean by "couldn't afford" - if we're talking payments then clearly we can afford it as we comfortably make our mortgage payments on top of living okay and still have quite a bit (probably of the order of 500 - 700 between us after all bills and food etc.) leftover each month (a lot more than we did renting)... the only thing standing in the way of us getting a suitable house ourselves was not happening to have £50k or whatever lying around for a deposit

In reality they weren't your only two options though were they? It was having some of our £800 a month go towards equity on a brand new expensive house, versus some of our £800 a month go towards equity on a not so shiny cheaper house that might need some redecoration, versus all of it going in a landlord's pocket.

Two options that resulted in us getting a house suitable for our future needs (of having a family etc) - we could have moved out of the house we were renting, found a cheap professional house-share for £300 pcm, given up all luxuries and sold all of our material posessions to attempt to optimise saving up a bigger deposit faster, but our quality of life would have sucked... As it stands we're now in a house that we could potentially stay in for the next 20 - 30 years (I don't know if we will, but we won't outgrow it and be forced to move)

 

[krooton]

Ultimately - and I realise this may come across as vaguely elitist - it is right and proper that some people should not be able to afford to buy a house, if they are towards the bottom of the wealth pile. Yes they need options for housing but that doesn't mean that every tom dick and harry working in a basic job should be on the ladder in their 20s. The same as how people on middle incomes should not be able to afford the luxury pads in the best locations. Expectations are very high, people like to look at the olden days of cheap housing but when you dig beneath the surface actually home ownership wasn't that high, young people still spent all their money etc. My parents bought a good house at what is now a very cheap price (perhaps around 8% of current value) but even so my dad told me they didn't have a lot of money to throw around.

Do you think it is right for a mid-30s couple, with a household income in the top 10% for the country, to not be able to afford a family home without government help?

 

[Kaka]

People like to use soundbites such as "houses they cannot really afford" but really what we are saying is "could not afford if this scheme wasn't in place". The fact is the scheme is in place, so it is affordable, because it's a very cheap source of finance.
Personally, I would definitely get rid of such schemes, as it maintains pressure on house prices. If we stopped the cheap finance, then demand [at a given price] would drop, prices would drop, and housing would get more affordable.

Similar with the talk of needing to build more 'affordable housing' - my view is we just need to build more housing full stop and then the natural equilibrium will shift making property more affordable. Build loads of nice houses and nice houses will get cheaper.

Ultimately - and I realise this may come across as vaguely elitist - it is right and proper that some people should not be able to afford to buy a house, if they are towards the bottom of the wealth pile. Yes they need options for housing but that doesn't mean that every tom dick and harry working in a basic job should be on the ladder in their 20s. The same as how people on middle incomes should not be able to afford the luxury pads in the best locations. Expectations are very high, people like to look at the olden days of cheap housing but when you dig beneath the surface actually home ownership wasn't that high, young people still spent all their money etc. My parents bought a good house at what is now a very cheap price (perhaps around 8% of current value) but even so my dad told me they didn't have a lot of money to throw around.

We've past the point where affordable housing exist now unfortunately, particularly for new builds. It's quite a vicious circle really, raise interest rates to stop cheap financing and the supply of new houses slows down. In the meantime, population growth is steadily increasing and with it the demand for more housing.

 

[HangTime]

Do you think it is right for a mid-30s couple, with a household income in the top 10% for the country, to not be able to afford a family home without government help?

I guess there are two ways to answer this.

On the one hand, assuming there are no other factors at play (like large debts, excessive expenditure, desires to live in expensive locations etc) and by 'family home' we don't mean anything too extreme, then no, I would say that probably isn't right.
On the other hand, that's not so far removed from the situation I am in, if we relax the location constraint. Late 30s, top 5% household income, can't afford to buy a family home that we would deem suitable in close proximity to where I work. And that's kind of OK, because people don't have the divine right to live round the corner from where they work, or where they grew up etc.

 

[uncle_rufus]

Spurred on by this thread and some further reading I think my current new plan/thinking is this:

I checked and the cost to get out of our fixed 5 year rate 2 years early (in August which is when the loan interest kicks in) would end up costing of the order of ~£5k... Versus holding onto the loan until the end of the 5th year of the fix which will cost us more like ~£2k in loan interest... If we were to re-mortgage in today's climate it looks like I can expect pulling the equity loan onto the mortgage would add around £250 pcm to our payments, so I think what I'm going to do is to try and start overpaying the mortgage by (at least) that amount now (I'm allowed to overpay up to 10% per year which is well above £250 pcm)... that way if we decide to re-mortgage at the end of this fix to pull in the loan I'll have the option of stopping overpaying to stay on (roughly) a similar amount (who knows if our circumstances will be different by then and may not allow for making overpayments!). As for our savings I think it's good to have some accessible money in case of an emergency, so I'd rather not shove all of it onto the mortgage; we'll hold on to it for now... Also I've been planning to accept the risk of using a small proportion of it on some investments that might be able to out-perform what the same amount would have on overpayments...

Might not be the final plan yet but it feels alright... as ever you have to make a ton of assumptions as who knows what the economic picture will look like over the next 2 years and what else could change during that time

 

[HangTime]

going by your elitest logic should we just scrap benefits entirely and let just those that work be able to afford to do anything?

I'd say that's a discussion for a different thread, and not a discussion I've got any particular interest in as it is too contentious and too multi-layered...
More broadly though, you only have to look at posts on this forum to see people complain about cost of housing yet often they're packing the latest gear, iPhone this, 4k TV that, posting from a gaming PC, figuring out where to go on their next international holiday, or what hot hatch to get next etc, basically all spending a lot on non-essential goods. If people want it all at an early age then I think they need to be in the top echelons of wealth, I think that's a real difference from yesteryear when yes housing was more affordable but people also spent less of their income on such luxuries. Thinking back to when we bought our first house, which was only shortly before the 2007 peak, I think the only real excessive item I had was a moderately good PC (no components costing over £200 mind) and perhaps a couple of nights out a month, everything else was ordinary. Small 14" CRT TV, free mobile on a contract for £15/month or so, had only ever been abroad 3 times, pretty basic wardrobe. Even by the standards of the time, my stuff was bang average, plenty of people packing 28"+ TVs etc back then.

 

[Psycho Sonny]

Do you think it is right for a mid-30s couple, with a household income in the top 10% for the country, to not be able to afford a family home without government help?

so what are the other 90% doing that don't have a HH income in the top 10%?

you are choosing to live and buy in an expensive area of london.

why not stay in Birmingham and commute in?

another question would be. do you think it's right there are children born into such poverty their parents earn less than £20 a month? if you are in the top 10% of earners then you need to man up tbh.

 

[Psycho Sonny]

I'd say that's a discussion for a different thread, and not a discussion I've got any particular interest in as it is too contentious and too multi-layered...
More broadly though, you only have to look at posts on this forum to see people complain about cost of housing yet often they're packing the latest gear, iPhone this, 4k TV that, posting from a gaming PC, figuring out where to go on their next international holiday, or what hot hatch to get next etc, basically all spending a lot on non-essential goods. If people want it all at an early age then I think they need to be in the top echelons of wealth, I think that's a real difference from yesteryear when yes housing was more affordable but people also spent less of their income on such luxuries. Thinking back to when we bought our first house, which was only shortly before the 2007 peak, I think the only real excessive item I had was a moderately good PC (no components costing over £200 mind) and perhaps a couple of nights out a month, everything else was ordinary. Small 14" CRT TV, free mobile on a contract for £15/month or so, had only ever been abroad 3 times, pretty basic wardrobe. Even by the standards of the time, my stuff was bang average, plenty of people packing 28"+ TVs etc back then.

a lot of people like that i'm afraid. it's their money and they can spend it as they like but then IMO they shouldn't complain when they cannot afford the house they really want because they buy crap they don't really need.

it's about finding a balance which works for you and balance is the key word here. no point having a nice flashy home if you cannot afford anything else.

 

[HangTime]

The counter argument is that housing could still be unaffordable even if people lived like paupers, i.e. no luxuries but still can't afford a deposit or whatever. But one thing is for certain, if you ***** thousands on non-essentials then even if prices came tumbling down (or otherwise housing become more affordable via schemes like HTB) then you aren't really going to be in a position to react, especially if you've racked up debts to fund that lifestyle. People will say "Yeah so I saved £15k but that's not enough, may as well live my life as I'll be waiting forever". But if they kept that £15k and saved over a couple of years and got that up to £20k maybe in 2 years time £20k would be enough, certainly more so than if they had £200 to their name and a drawer full of one-trendy tech.

 

[Skillmister]

On the one hand, assuming there are no other factors at play (like large debts, excessive expenditure, desires to live in expensive locations etc) and by 'family home' we don't mean anything too extreme, then no, I would say that probably isn't right

But he can only be talking about London so it's pretty much irrelevant compared to the majority of the rest of the country anyway.

A couple in their mid-30s on average UK salaries can afford to buy a decent 3 bed house in something like 75% of the UK.

If I start thinking about how much disposable income I would have even on my below average salary if I had a partner on a similar wage.. Christ I'd be living one hell of a life! I should get shacked up...

 

[uncle_rufus]

For context - the wife and I live fairly comfortably, and do have gaming PCs, phones, a basic car, and over the years have spent money on furniture, a couple of european package holidays and other stuff like that but have no debts at all (besides our student loans)... we don't get many takeaways and don't really drink or spend lots on going out which I imagine can add up if you do it a lot... When thinking about buying a house we considered the fact that we could tolerate a pretty hefty interest rate rise, and an even more extreme one if we were to cut back on things a little - and since then both our salaries have gone up (mine by quite a bit)... but we still wouldn't have been in a position to buy a house that could even come close to the standard of the one we were renting (which wasn't exactly amazing to begin with) without something like this HTB scheme... (Edit: and fair enough you might say that we should have just gotten a smaller place, but given the incredible cost involved in moving house not to mention the stress of it etc. we didn't really fancy getting a place that we would potentially grow out of in a few years time)

(However as an aside and kind of playing into the points above we spent quite a bit on a wedding in 2014 and a honeymoon this year to the tune of just under £10k but in our defence that money and the money for the wedding all came from a small inheritance I got from my Great Auntie, who loved travelling and it feels right to put it towards something memorable rather than just paying off debt/mortgage - no matter how sensible that might have been!)

 

[krooton]

For context - the wife and I live fairly comfortably, and do have gaming PCs, phones, a basic car, and over the years have spent money on furniture, a couple of european package holidays and other stuff like that but have no debts at all (besides our student loans)... we don't get many takeaways and don't really drink or spend lots on going out which I imagine can add up if you do it a lot... When thinking about buying a house we considered the fact that we could tolerate a pretty hefty interest rate rise, and an even more extreme one if we were to cut back on things a little - and since then both our salaries have gone up (mine by quite a bit)... but we still wouldn't have been in a position to buy a house that could even come close to the standard of the one we were renting (which wasn't exactly amazing to begin with) without something like this HTB scheme... (Edit: and fair enough you might say that we should have just gotten a smaller place, but given the incredible cost involved in moving house not to mention the stress of it etc. we didn't really fancy getting a place that we would potentially grow out of in a few years time)

(However as an aside and kind of playing into the points above we spent quite a bit on a wedding in 2014 and a honeymoon this year to the tune of just under £10k but in our defence that money and the money for the wedding all came from a small inheritance I got from my Great Auntie, who loved travelling and it feels right to put it towards something memorable rather than just paying off debt/mortgage - no matter how sensible that might have been!)

You raise another point, yes, we could have taken smaller steps, going from flat to terrace and then detached later on, but that would have meant losing around £15k on the extra lot of fees and stamp duty.

 

[A2Z]

Came to this thread after you mentioned it in your other thread, thanks.

Very interesting reading. Will be doing the same, using HTB to purchase, at the end of the year when I have maxed out my HTB ISA. My original plan has always been to re-mortgage after 5 years when it comes to paying the loan and hopefully pay it all off.

 

[uncle_rufus]

Came to this thread after you mentioned it in your other thread, thanks.

Very interesting reading. Will be doing the same, using HTB to purchase, at the end of the year when I have maxed out my HTB ISA. My original plan has always been to re-mortgage after 5 years when it comes to paying the loan and hopefully pay it all off.

Cool man - good luck with it

I think in hindsight my one tip if you can do it would be to try and get a mortgage that will allow you to overpay and start overpaying it right from the start... even if you can only afford to pay an extra £50 a month or whatever over the 5 years that will make quite a big difference and probably help you out when you come to try and re-mortgage

 

[utajoker]

we bought our first home on first buy scheme, we sold in October and paid back our loan. we actually had to pay less back as the flat sold for slightly less than what we paid for it but was still in its price range so we did not have to make up any difference.

If your house value goes up you will have to pay back more don't forget.

We are buying mid year with help to buy and are planning on saving enough over the 5 years to pay back hopefully half the loan then possibly remortgage to clear the rest.

Our son will be in free child care this year and then school next year or so, so we will have a massive amount of money from childcare become available to put away. We will just have to live within our means for a couple of years.

 

[Mercenary Keyboard Warrior]

Just a note as you appear to be with Nationwide ( @uncle_rufus )

When you make overpayments under £500 they do not adjust your monthly payment, its set to trigger at the next logical point. Which for you would be the end of your term of your fixed deal.
This default would put your amount lower but leave the term the same.

If you pay £500 or more you can select what you want to happen. The most flexible of which is to leave the term the same, and the payments the same, but build an overpayment reserve.
I believe the default for this is also to keep the term the same, but to adjust the payments at the next logical point. (which is expiry of deal or a change in interest rates).

Its no biggie right now, but you want to think about the options if you want to pay your mortgage off significantly faster. If so you want to avoid your payments being lowered as that affects the max overpayment you can make, as the cap is linked to the original amount, and if your minimums drop then your overpaying more. Hope that makes sense!

 

[Martini1991]

We're at the 2 year point to our 5 year HTB period.
We only have an equity loan of 20K (Bare in mind that increase in house increases the loan).

We started saving last year, we've saved 3.6K.
We'll be upto 8K by the end of this year.
Year after we'll be at about 15K
End of 5 years we'll be at 22K.

We're intending to sell the house and moving up the ladder, but I always put a potential plan in place to save up to pay it off.

I do fully agree that the scheme allows people to buy houses they can't afford, as when we buy our next house if we used HTB again I know we would be unable to pay it off.

 

[uncle_rufus]

Just a note as you appear to be with Nationwide ( @uncle_rufus )

When you make overpayments under £500 they do not adjust your monthly payment, its set to trigger at the next logical point. Which for you would be the end of your term of your fixed deal.
This default would put your amount lower but leave the term the same.

If you pay £500 or more you can select what you want to happen. The most flexible of which is to leave the term the same, and the payments the same, but build an overpayment reserve.
I believe the default for this is also to keep the term the same, but to adjust the payments at the next logical point. (which is expiry of deal or a change in interest rates).

Its no biggie right now, but you want to think about the options if you want to pay your mortgage off significantly faster. If so you want to avoid your payments being lowered as that affects the max overpayment you can make, as the cap is linked to the original amount, and if your minimums drop then your overpaying more. Hope that makes sense!

Thanks for this, as it happens I spoke to them on the phone earlier and learnt the same thing...I think I'm probably just going to accumulate £500+ every-other-month so that I can pay with the term-reduction option (to me that feels like the method that results in the biggest saving in the end)... Keeping the term the same and not recalculating feels like it's just saving into a 0% interest savings account until the end of the next deal/rate change, isn't it?