Budget 2013: Help to Buy boost for home owners

This beggars belief! The problem isn't with lending but obscenely high house prices and buy-to letters snaffling supply due to a lax tax regime. 1500 buyers have taken out New Build 5% deposit mortages since it was introduced yet this new wheeze extending it is called help for millions!

New builds are chronically small and overpriced compared to the rest of the market. I note that you can borrow up to 600K as long as you don't have a salary of more than 60k.

More discounts for council tenants under the right to buy but none at all for Housing Association tenants. Totally unfair and completely out-of-touch!

John. Completely agree.

Maintaining negative real interest rates, printing money, and introducing stupid schemes to support the overpriced housing market, will not create wealth in this country. Politicians really are a bunch of morons. Bless them, they don't have much of a grip on economics, and everything they do is motivated by how many votes they might garner as a result.

Speechless!

So it's only lending to people who want a 80% to 95% mortgage?

So if you want just a 40% LTV mortgage you can't get any of the money from the government?

Totally agree with all the comments above, including Anthony's, except:

"Politicians really are a bunch of morons. Bless them, they don't have much of a grip on economics, and everything they do is motivated by how many votes they might garner as a result."

Yes, in part, but they're not certainly not morons - they know exactly what they're doing. The policies announced today are payback for party donations from housebuilders and to get places on the board for when they leave parliament.

One thing's for sure - they do nothing for the good of the country - just themselves.

Labour, Lib Dems, Conservatives - all the same colour and that colour is brown.

This is totally and absolutely disgusting, something you continually expect from this self serving Government

This goes way beyond stupidity, this Government certainly know how to help their pals the house builders.

Want more cash for pseudo- conservative party funds; want a seat on the board of your favourite house builder.

This is a certainty, when you lose your seat or retire from being a full time liar for the state.

I see the share prices for builders went up, not surprising ,I should think a few politicians were richer by the end of the day.

I see that the saver has gained absolutely nothing, well that isn’t a surprise, this Government only supplies help to the deadbeats of our society.

Roger. Agreed.

Alan Tonks

Share price of Builders going up.

Pity you did not read the Evening Standard on Twitter before the Budget was formally delivered. You could have made a lot of money as well.

Osborne said that this will allow people who can afford them the opportunity to get a mortgage. If they can afford them surely he should be addressing the issue with the banks and not lining the pockets of builders.

It won't be any use in London for a minimum of half of mortgagers. Over 50% of mortgages in London are interest only and the chancellor's scheme doesn't allow these.

It will be interesting to see if asking prices for properties other than new builds suddenly shoot up in the general exhuberance of loose credit.

With a new BoE Governor making noises about inflating the economy, it's difficult to see how the housing initiative will lead to anything other than another sub prime boom followed by a bust as interest rates rise - all to be picked up by the taxpayer.

Come on guys! too much bah humbug! Many people will be able to get on the housing ladder what so bad about that? They only have to pay back the loan when they sell and as we all by now know house prices are not coming down. As someone who has been long the builders since 2009 and have been arguing my case on this board since that time it is clearly something I feel comfortable with as long as prudent criteria are applied of course.

Joe, House Prices have to come down.If you have an explanation- excluding a pyramid scheme where you sell to the next mug further down the line-of how you can pay back a loan over 25 years of a sum 10 times your gross earnings.Even excluding the interest which is rolling up on the sum, at least say 11 of those years (because your net yearly salary will be lower than your gross of course)would be given entirely to the loan. Without feeding, heating or transporting or annual holiday, insurance etc . Please let me know so we can write a book on it, it will be a best-seller and we can buy lots or at least a few houses. This scheme offers mortgages of up to 600k on a MAXIMUM salary of 60k.Of course not everyone will be on the maximum but why set such a high ceiling if those loans are unacceptable.

In investing terms the time I feel most comfortable in investing is when people say something will never happen. People forget that never is actually a very long time. But your assertion that many people will be able to get on the housing ladder what so bad about that could have been spoken by Bill Clinton or Fanny and Mae.

Joe

Would love to be arsed to compose a reply to your blog, but I would rather refer you to the article on Money week's website entitled 'britains obsession with house prices' - penned by John Stepek. Couldn't have put it any more succinctly.

PS: This isn't free market economics, it bears more relation to one of Stalin's five year plans. Not you Joe, the real one.

John McCarthy

There is no law of physics that says house prices have to come down. In 1950 you could but a house for £2000, in 1965 the same house would have cost £4,000, in 1985 the same house would have cost £45,000 and in 2010 that house would cost £300,000. The one certain law you seem to have forgotten about is inflation. When a central bank prints money the price of things goes up. To give a more extreme example, in Zimbabwe $100 trillion dollars would buy you 3 eggs. Now tell me again that house prices must go down.

Jonathan.House prices must go down.I was talking about in real terms and not nominal values. If wages were keeping pace or ahead of inflation there could be scope for House Price rises but this is certainly not happening in most sectors of the economy.

You give some interesting time references.There have been house price crashes in the early eighties, the early nineties and also way back in the fifties. And the average house price has fallen from £194.000 in 2007 to £164,000 now. So tell me again that prices will always go up.

John McCarthy

I doubt with all the money printing going on that they will go down. Long term the price always goes up, whether they stay the same relation to wages is another thing, this does tend to vary with availability of funds interest rates, confidence etc... But all these effects are very minor compared to the overruling massive inflation cause by central banks. With interest rates at record lows and what looks like intentions to keep them that way for the foreseeable future and the BoE muting its inflation target. There is very little you can do with money other than buy assets unless you want to see it shrink.

Jonathon, you describe inflation as massive but it isn't yet, though it may become so - though bob Prechter doesn't think it ever will because of the underlying forces of deflation still present.

The only reason circa 3per cent inflation is a problem at the moment, is because of the Govts deliberate pursuit of negative real interest rates, which is destroying the savings of all of those debt free individuals, myself included, who didn't behave like complete dicks over the last ten years or so.

Once the Govts low interest rates policy unravels, which it will when we have a good old fashioned sterling crisis, and interest rates have to rise, you might be surprised at how much house prices fall, even in nominal terms.

Remember 1992 - we had a Govt then who thought they were 'in control'.

Does not the historical record on house prices show that they are cyclical, but that long term they march more or less with inflation? But it is easy to burn fingers over timing, either becoming stuck in negative equity or unable to maintain mortgage payments if the purchase is made at the end of a periodic boom or as interest rates rise during a correction.

This time the bust would so far seem Regional and muted because of supply shortages, exacerbated by the rise of single families, immigration and inflation that has made houses desirable investment assets.

These different circumstances make the forward outcome difficult to discern. Inflating matters further with easy money and continued shortage of supply can surely only result in already overvalued housing climb further, especially in the South, making Joe's investment view likely for a while... a longer while if the housebuilders react with cautious building programmes to keep prices up (control of land banks, planning relaxations in play?). But surely sooner or later, as wider inflation inevitably must be brought under control, interest rates will have to rise and housing tears start to flow led by default on the taxpayer loans...

Anthony O' Grady

Massive is just a relative term. Is something rises from £2,000 to £300,000 even though this is over 60 years it is quite a large rise. The Bank of England would like you to think that inflation is caused by the supply and demand of things changing, it is however solely a result of money printing. In 1950 the average wage was about £5 a week.

steven fieldfare

I agree, at the moment the BoE are creating money at a rate never seen before they can prevent house prices from falling if they wish.

Actually Jonathan, If I bought an asset I would want either capital appreciation or steady income. New Builds are very hard to sell and BTL is not allowed. But the thing that seems to be ignored is that if you believe that Zimbabwe type inflation is on the way you best avoid this scheme altogether. These are its terms

"After five years it will attract a fee of 1.75%, which will rise annually by RPI inflation plus 1%." You say how prices will always rise because of inflation. Well, so will your costs!

John

New builds lose about 5% of their value as soon as you move in. Everything suddenly becomes second hand, second hand kitchen bathroom etc...

I don't believe Zimbabwe style inflation is about to take hold in the UK, that was just meant as an extreme example/illustration of how a central bank can cause any amount of inflation until it can fit no more zeros on a bank note.

I know RPI is supposed to be an accurate measure of inflation but it also seems like the people who decide what goes in the basket are always looking at things that don't go up very fast or come down in price like memory sticks, blu-ray players etc as the next item to add to it. I'd like to see a historic chart of how the price of fixed items have changed against the historic RPI figures.

You do get 5 years interest free on it before you start paying interest.

What does "attract a fee of 1.75%, which will rise annually by RPI inflation plus 1%" mean?

Say you borrow £100k from the government inflation is 3%.

After 5 years you owe £100k

After 6 years you owe £100k and have to pay a fee of £1,770

After 7 years you owe £100k and have to pay a fee of £1,770 + £3,000 + 1,000

After 7 years you owe £100k and have to pay a fee of £1,770 + £3,000 + 1,000 + £3,000 + 1,000

It's hard to make out what the sentence means.

Can you pay it back at any time or can you only pay it back when you get sell house and they get a share?

I can see fraud occurring where house prices are bought overpriced using government loans then sold off cheap to a straw buyer with the government picking up the loss.

Re the John/Jonathan debate, it seems to me that too much as yet remains unknown about the scheme.

As Jonathan picks up at the end of his most recent post, there would seem loopholes/opportunity to distort the scheme in manners not intended. I have already seen finance people explaining in TV interviews the complication and additional costs of "arranging" mortgages. I expect builders to control the rate of supply to massage steady price increases. There is plenty of camouflage available within ever tightening new building standards regulations and infrastructure/green rebate levies.

My wider doubt is that all the usual suspects will emerge to fire along another housing boom, encouraging further borrowing on existing housing stock. Essential need to re-balance the economy will be abandoned for short term election prospects. Deja vu.

The banks love churning mortgages with arrangement fees so 2 and 3 year fixes are right up their street. Off-topic slightly but I wonder are the fees they get when they renew a mortgage or switch to a new deal booked immediately as income even if the mortagee is on interest only or in arrears?

Re the fee Jonathan,that fee plus RPI plus 1% is only on the government part of the loan I would say so in the cas of 100k you would have had another 470k from a bank as well on different terms. The fees I think were stated in the telegraph. Jonathan, you say new builds lose 5% straight away, I would say it is more. I would love to hear from an EA here on how many New Builds have they sold to a second buyer of it?