So we now have details of the rates RBS & Halifax will offer customers who want to benefit from this latest scheme and I’ve done some calculations.

Based on the property I currently rent for just over £1000pm a 95% mortgage over the longest term possible (35 years) would cost £1311pm!

My question is who on here would pay the extra to own their own property in 35 years?

Your rent of £1000 per month probably has about a 6% profit margin or maybe more for whoever owns it. They no doubt have a better loan to value ratio than 95% so get cheaper rates etc.

You’d probably be better off saving that extra £300 month until you have a bit of a deposit and doing the whole purchase without the help to buy scheme where you will have your choice of more providers and better rates.

I guess a lot of people would, it gives you long term stability and as rents increase, your mortgage will stay much the same (depending on the mortgage you choose)

Means in 35 years you have a house with zero rent compared to having a rent of maybe £2000 per month with the extra £115000 that you would have saved in the bank.

Not after advice for myself cheers somouk as have no intention of buying. As a mortgage advisor I’m interested to find out who on here thinks this scheme is a good idea and why.

Just a bit of a straw poll really.

Cheers

It’s a good idea because people want the securtity of owning their own home.

there are pitfalls like the 20% you ‘borrow’ from the Gov is paid back at the value when you pay it back… e.g if you borrow £40k from Gov, the house goes up by 100k… you pay back £60k .

Rent will go up, house prices will go up, mortgage should go down as you pay off the capital, you will possibly live longer than 35 years. Your figures just take a couple of headline rates, over you whole life buying should work out better financially than renting.

I wouldn’t solely because it locks you into a high interest rate for a long time.

Not after advice for myself cheers somouk as have no intention of buying. As a mortgage advisor I’m interested to find out who on here thinks this scheme is a good idea and why.

In that case yes I probably would purchase instead of rent. Primarily because it is an investment I could sell and release funds where as renting is lost income.

Rent will go up, house prices will go up

Not necessarily. One day our mind-numbingly stupid government may finally realise that artificially inflating a market which is already crazily over-priced and distorted isn’t actually, never was, and never will be ‘economic growth’.

Read somewhere it’s only available to households earning less than £60k.

Is that right?

Beacause how can you get a mortgage on a house worth upto £600k when you can “only” earn upto 60k on the scheme??

mortgage should go down as you pay off the capital

Oh really?!

In scenario about a purchase would be crazy as far better to invest the saving and watch that investment grow. Also save money/hassle on repairs.

Ro5ey – Member

Read somewhere it’s only available to households earning less than £60k.

Is that right?

Beacause how can you get a mortgage on a house worth upto £600k when you can “only” earn upto 60k on the scheme??

Presumably, going by THIS , it will mostly come to the aid of households who earn less than £60k who have to eke out a £440,000 bonus just to get by.

Not sure I follow you there weeksy as it’s a straight forward 95% mortgage from the lender not a mortgage and government loan of 20%. If the property price increases by £100k then you get all the benefit of that increase.

Ro5ey – Not that I am aware of!

Binners I think I agree with you and this is why I’m asking as the scheme is only available for the next 3 years so inflating property prices as demand won’t be able to keep up with supply so fueling the housing bubble which will again go pop!

The scheme is only planned to be available for 3 years. But the governor of the bank of England has been asked to constantly review it, with a view to stopping it ‘if’ (or, lets be honest: when!) it starts to fuel a housing bubble. Seeing as every economist on the planet knows the whole thing is absolutely mad-as-a-badger, hatstand bonkers, I’ll give it 12 months, tops! The repercussions of its idiocy will last considerably longer though

As a mortgage advisor I’m interested to find out who on here thinks this scheme is a good idea and why

Erm, shouldn’t you be telling us?

Nothing wrong with turning it around tomhoward and yes I have my opinions but so does everyone else which is why I’m asking. Sometimes it’s good to look at things from the view of someone outside the industry 😉

I thought we were referring to the Help to buy where the Gvt pays 20% in an interest free ‘loan’ ? Hence making the 5% deposit an option as techincally it’s 25%.

“But the governor of the bank of England has been asked to constantly review it, with a view to stopping it ‘if’ (or, lets be honest: when!) it starts to fuel a housing bubble.”

has it started yet ? we seem to be in a bubble :s

It’s basically the “should I buy or rent” question. If I could comfortably afford it, I’d buy, so probably not take a 35 year mortgage and save a bit longer for a bigger deposit and better rate. If it would be a big struggle to afford it, I’d rent, then maintenance is the landlord’s problem, not mine. The barrier to long term renting being desirable rather than expedient, is the assured shorthold tenancy model. As a landlord with an eye on the long term, I’d be happy to use a lease with more security for the tenant and a much longer notice period, with reasonable safeguards against twuntishness.

With a retirement age of 67, a 35 year loan will only be available to under 32 year olds, ie a loan for longer than they’ve been alive. I can see that being quite a strong psychological barrier to some.

Smacks of sub-prime loans to me. That and the laws of our free market economy, whereby supply and demand directly affect price. Increase demand without increasing supply. It’s bollox.

Why oh why is our economy focused on the illusion of bricks and mortar?

I could go on. If I cared, I would despair.

One reason the lenders don’t like 95% mortgages is because there’s an industry view that the whole housing market is overvalued by 15% and may well drop a bit soon.

Also the Bank of England liquidity rules make it very expensive for lenders lending at higher percentages.

has it started yet ? we seem to be in a bubble

We are. As the previous brainchild of our genius chancellor ‘Funding for Lending’ was such a rip roaring success. All the billions (of our money) given to the banks specifically to loan to SME’s to get the ‘real’ economy moving, was instead diverted into the much easier, less risky, short-termist, self interested, and more lucrative (and growth-wise useless or counter-productive) mortgage market instead, thus starting the bubble in the South East.

So not only was this Help to Buy completely unnecessary, its bordering on insane!!!

the question is – what do george osbourne and a turtle on a pole have in common*……

*yes i stole it ….do one. 😉

Why oh why is our economy focused on the illusion of bricks and mortar?

Well, in my short financial services lifetime I’ve been a victim of the endowments mis-selling, the Equitable Life fiasco, redundancy/PPI that wasn’t worth the paper it was written on and a couple of other more minor annoying losses. After that, like many other folk, we decided that we’d do it ourselves and not trust in non tangible assets again. Property is our pension, pure and simple.

I find it pretty depressing that it’s widely accepted that the housing market is over-priced and set for a bubble to burst, but that governments just carry on inflating them, treating the symptom (people not being able to afford houses) rather than allowing the cause (housing being too expensive) to sort itself out.

I’d like a place of my own, but the prospect of sinking a load of money into artificial value, being kept high by tactics that look remarkably similar to those that contributed to the last financial crisis doesn’t really fill me with enthusiasm.

Well, in my short financial services lifetime I’ve been a victim of the endowments mis-selling, the Equitable Life fiasco, redundancy/PPI that wasn’t worth the paper it was written on and a couple of other more minor annoying losses. After that, like many other folk, we decided that we’d do it ourselves and not trust in non tangible assets again. Property is our pension, pure and simple

You have my sympathies, like you, I have fallen foul of the scams dressed as thievery. None of it real. All of it numbers created to make a few feel good because they have bigger numbers. And a pension that relies on the continuation of the over inflated illusion of value, that is only being furthered by the commitment to limit supply.

A real social benefit to help would be to instigate a mass building and renovation program. Create more housing and opportunity for everyone. Unfortunately, this would, at a stroke, create mass negative equity and unsustainable loans already in place. You may therefore be safe.

Interesting that as a mortgage adviser you choose to rent 🙂

Personally I’d not go for the deal as once on a 95% mortgage it will be difficult to remortgage should you want to. It’s hard enough with a 90%. So I would stick it out and save a greater deposit.

I find it pretty depressing that it’s widely accepted that the housing market is over-priced and set for a bubble to burst,

Nah, never going to happen. Too many people have mortage/investment/pension locked into their properties to sell them for 15% less than they bought them for.

There was a guy on here a few years ago telling everyone there was going to be a housing bubble burst and he’d sold his house, was going to rent for a while and buy it back for half the price and the rest of us were complete morons for not doing the same. Prices have steadily risen since….

Personally I’d not go for the deal as once on a 95% mortgage it will be difficult to remortgage should you want to. It’s hard enough with a 90%. So I would stick it out and save a greater deposit.

Why not go for the deal, and then save, by the time you want/need to remortgage you will be ready, with the money you would have been saving either way.

Prices have steadily risen since….

You sure about those figures? Surely the point of the Help to Buy thing is that you get an extra 20% from the govt on the deposit, I can’t believe that you’d end up paying >£1300 a month with an effective 25% deposit on a house you rent for £1000.

We pay less than that per month on a £250k house we bought with a 5% deposit (no Help to Buy).

You sure about those figures? Surely the point of the Help to Buy thing is that you get an extra 20% from the govt on the deposit, I can’t believe that you’d end up paying >£1300 a month with an effective 25% deposit on a house you rent for £1000.

You don’t have an “effective 25% deposit” though.

You have a 5% deposit.

You are making payments to the mortgage company on 95% of the purchase price.

Owning your own place means security and not moving every year or so .Its yours to drill holes in ,get mud on the walls and abuse as you see fit without losing a huge deposit because of due wear and tear

I haven’t actually seen any of the offers the banks are giving on this scheme, what sort of interest rates are available?

Natwest – 5% 2 year fixed and 5.5% 5 year fixed.

Bear in mind that £1000 rent now will be probably £5,000 in 35 years. On the minus side, if you own it you have to fix it – boilers, roof, windows, etc etc.

You don’t have an “effective 25% deposit” though.

You have a 5% deposit.

You are making payments to the mortgage company on 95% of the purchase price.

That’s not how it reads to me currently with the equity loan scheme, but that’s only for new build. You would have a 5% deposit, have an equity loan for up to 20% then the balance would be through a standard mortgage. I think they’re a **** disaster personally. We need to move in the next 2 years really so could do with a flat or slighty falling market. Like 95% of people 🙁

Bear necessitys that a good interest rate….. Esp on a 5 year fix

I only ot 5.39% last year with a 10%

Only downside is its with natwest.

With a retirement age of 67, a 35 year loan will only be available to under 32 year olds, ie a loan for longer than they’ve been alive. I can see that being quite a strong psychological barrier to some.

Is this just on this scheme because I’ve just taken out a 32 yr loan aged 45.

Btw thete are two very similarly named schemes (from what I can tell) one is an equity loan on New builds, the other is a government backed mortgage scheme. Lots of people, including me, getting confused about which terms belong to which. Rightmove had a useful article explaining them