a scheme launched by the government now means the tax payer is the guarantor on 95% mortgages
not sure I'm in agreement with this as its open to abuse
Sex God
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Sex God
Quote by Lizaleanrob
a scheme launched by the government now means the tax payer is the guarantor on 95% mortgages
not sure I'm in agreement with this as its open to abuse
Drop in the ocean compared with us being guarantor to over £40bn debts at Royal Bank of Scotland, never mind Lloyds Banking Group (inc Halifax/Bank of Scotland - HBOS), and the billions in the 'toxic' part of Northern Rock, i.e. the bad debt part not sold off to Sir Beardy.
:eeek:
You've got to remember it's only money and it's not even the government's, it's ours, being used to help the hard pressed political party donors in the construction industry.
:small-print:
Cynic ?
Moi ?
:doh:
Sex God
Especially as the scheme applies only to the insanely over-priced new-build properties thrown up by some of the lowest quality building firms out there. In the event of even another small dip the mortgage holder is likely to be plunged into immediate negative equity, but the building firms care not because the 3.5% contribution they've paid into the scheme is only a small portion of their total profit, and a small price to pay for a scheme that helps keep prices where they want them to be for some of the smallest footprint, most cheaply built, lowest quality housing produced anywhere in Europe.
The reason the banks are insisting on 20% deposits is because, having being party to the most recent inflationary spiral they know that property in this country is massively over-priced. What is really needed is a genuine correction that values property properly. That's what will help first time buyers the most. The Govt OTOH seems to prefer price-inflation, which can only be to the detriment of first-time buyers, at the tax-payers expense. That they're trying to spin this as a helping hand to anyone but the building industry is truly dishonest.
The reason the banks are insisting on 20% deposits is because, having being party to the most recent inflationary spiral they know that property in this country is massively over-priced. What is really needed is a genuine correction that values property properly. That's what will help first time buyers the most. The Govt OTOH seems to prefer price-inflation, which can only be to the detriment of first-time buyers, at the tax-payers expense. That they're trying to spin this as a helping hand to anyone but the building industry is truly dishonest.
Quote by neilinleeds
snip...
The reason the banks are insisting on 20% deposits is because, having being party to the most recent inflationary spiral they know that property in this country is massively over-priced. What is really needed is a genuine correction that values property properly. That's what will help first time buyers the most. The Govt OTOH seems to prefer price-inflation, which can only be to the detriment of first-time buyers, at the tax-payers expense. That they're trying to spin this as a helping hand to anyone but the building industry is truly dishonest.
In the article quoted by rob, I thought I saw mention of 95% loans, therefore only 5% deposit
Sex God
I was referring to recent practice where banks have been unwilling to lend anything near asking price, 20% deposits being quite typical because they've had their fingers burned once already with the most recent 'correction' and know prices are still over-inflated. That's what the scheme's trying to address: their reluctance to lend. The Govt guarantees up to 5.5% of a 95% mortgage, the building firm puts in 3.5%, making a 9% contribution, so the bank is effectively left with a liability amounting to 86% of the asking price in the event of a default. In practice the bank is stumping more than 86% of the money up front but its exposure is effectively the same as asking for a 14% deposit. ( Ok, some small improvement on them asking for 20% but lets not quibble. ;) ) I think that's how it works as I understand it.
The effect must be to keep prices inflated above their 'true' value to the house builder's benefit and theirs alone, when what should be happening is that prices for 'starter' homes come down to a level that more accurately reflects their value, making them more affordable for first-time buyers, making banks more willing to lend against them. For free-market advocates like the Tories to be propping up the inflated housing market with tax-payers' money don't seem all that free-market to me, and hardly in buyers best interests?
The effect must be to keep prices inflated above their 'true' value to the house builder's benefit and theirs alone, when what should be happening is that prices for 'starter' homes come down to a level that more accurately reflects their value, making them more affordable for first-time buyers, making banks more willing to lend against them. For free-market advocates like the Tories to be propping up the inflated housing market with tax-payers' money don't seem all that free-market to me, and hardly in buyers best interests?
