A housing strategy for England?
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I have just read in the news about the new housing scheme launched by the Government today and wondered what everyones thoughts were?
In short the scheme intends to;
- Invest £400 million in stalled housing schemes to allow developers to complete 16,000 new homes.
- Allow mortgages of up to 95% of the value of new homes be offered by lenders (The Government to help underwrite part of the risk)
- Make more public sector land available for new building
- Up to £150 million to help bring empty homes back into use
Personally I think this can only be a good thing, especially helping lenders offer 95% mortgages on new builds, and hopefully complete some of the part finished developments that are present through out the country.
Responses (12)
Yeah I saw this on the news earlier, it all sounds like a good idea, especially getting empty homes up to scratch.
I think making 95% mortgages more readily available to fist time buyers could help but I would personally be concerned about negative equity buying a new home on a 95% mortgage.
The only thing is that I could swear that we've had several of these types of schemes in the past so am yet to be convinced it'll make a real difference - but fingers crossed non the less!
Also, do you think this scheme is aimed more at helping first time buyers or the struggling housing industry?
I'm sure it has pleased the construction work force and the builders as it work has been drying up for the last few years! So a good thing for them and first time buyers i'm sure.
This seems a good idea however the UK consists of more than just England so not Wales,Scotland and N.Ireland these other parts of the Uk also have tax payers and people in need of houses.
Good point, Noddy! I'm guessing they will trial it in England then the rest follow...
This was part of the point I was trying to make by calling the discussion 'A housing strategy for England'. How can they only be implementing this in England? There were no explicit plans to unveil it across the UK.
It all sounds good to me!
Yes Bandit I saw this on the Beeb earlier this morning.
Sounds good all round, I thought we wouldn't be seeing the 100% or 95% mortgage for awhile yet.
Pete raised a good point re negative equity.
Although very rare, I think 95% mortgages have been around and available to the very best applicants for a while, but making this available to a wider market can only be a good thing as long as banks don't go back to their old ways! I am sure the Government will have a number of measures on this too, so I am sure that won't be happening!
The way that lenders are looking at 95% mortgages is that they could spread the equity between the purchasors property and a relative such as a parent. This may be a way of parents helping their children and dont have pots of money lying around.
There are a select number of 95 & 100% mortgages on the market now and many lenders will consider 90% currently.
Well now, "investing" £400M in "stalled" schemes, sounds like the taxpayer bailing out failed developers. We bail out failing banks, so lets give developers some cash and bail them out - sure great idea. This government ensures the rich have taken no pain in this financial meltdown. These proposals continue to protect the rich. Rich buy to let landlords get 40% tax relief on their mortgage payments, first time buyers get nothing. This is tokenism - the government put a small amount of money into these schemes get publicity as if they are actually doing something that changes the dynamic, whilst rich people, just in the housing market, are receiving c£6 BN in tax relief on buy to let, whilst their renters effectively buy the property for them. We are going back to Victorian britain, the rich get richer, at the expense of everyone else. Don't be surprised - the cabinet is full of multi millionaire ex public schoolboys - whose interests will they protect above all ??
I do have a similar scepticism about this ollygark and it does sound like it does all fall back into helping the rich at the expense of others.
The scheme on paper may work, but in reality I think your opinions are valid and personally the monetary value of the changes are tiny in the whole scheme of things.
It's bloomin' stupid.
Basically, the taxpayer is *again* underwriting the risk for big business. This time it's builders rather than banks, but the problem is the same. What are the builders giving us, the taxpayer, in return? Do we get a share of the profits of sale or of any gain in the growth of the asset? I bet we don't. We have to give money if it's a failure but don't get money if it's a success.
It's stupid. The government had better be capping the prices of the new builds or they've just given builders a free pass to charge what they want with negative equity and defaults underwritten by the tax payer!
I am not convinced this is a great idea and I suspect represents a muted attempt on behalf of her majesty's government to stimulate public reaction ( call me cynical .. ). The trouble with this idea is that we simply don't have the 'feel good factor' to underpin the success of this .. 95% mortgages still need the ability to repay 95% payments, the job market has to climb out of recession ( particularly for the younger first time buyers )and inflation has to be conquered, once and for all.
By all means legislate to bring empty homes back into occupation but also legislate against greedy landlords and match Housing Benefits against fair and equable rents for everyone.
And while not the obvious comment here, someone needs to again recognise the dangers of uncontrolled immigration and how that is decimating the ability for the indigenous British to find somewhere to live.
This article nicely explains my concerns and doubts over the 95% scheme...
Yep, builders will increase asking prices to cover the 3.5% they need to lodge with the lender, then when prices fall it'll be the taxpayer who foots the bill. If prices are static are improve, the builder makes interest on their 3.5%.
As I said, this scheme privatises profits and socializes losses.
The taxpayer loses again.
Really interesting and varied posts from you all. Many people in their thirties are having difficulty getting mortgages even if they earn enough to pay for one but can't find enough deposit
lol, this is another silly Idea, as G-man said, "this scheme privatises profits and socializes losses." See my other post, the only way to fix this country is to increas interest rates, bring down inflation but at the cost of watching the housing market crash. I only bought 2 years ago. Paid a 25% deposit (Loan from family) and got the house at a very sensible price. (£83,000) I bought the house to live in as my home, not an investment. Let the crash happen, I probabvly will go negative equity. Am I bothered? No, So long as I have a roof over my head. I am in debt with a mortgage and the family, but if the poo hits the fan, I should be ok. So long as me and the missues dont loose our jobs!
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I think it's aimed at helping both, Pete.
If the government helps the housing industry it will create much-needed jobs and generate tax revenue so, in theory at least, everybody wins.
I see your point about negative equity but it is becoming so difficult for people to get on the housing ladder that I think I would be happy just to get a property!
According to the BBC it was to help both types of buyers.
I, like Feline, think the policy is aiming to help everyone, but in reality I'm not sure what impact this is likely to have.
No!!! House prices need to come down to affordable levels. This sort of thing just further inflates the bubble and makes the next crash that much bigger.
We need to stop mortgages over 90% LTV altogether, not underwrite them with taxpayer's money!
G-Man, could not agree more. I am amazed that some posters think this is a good idea - this is political tokenism. The money is so small, it has no effect on jobs or home availability, it's effectively a £400M advert for the current government. It also selectively bails out some failed developers - can you ppl not see that ?? Kickstarting the housing market, building affordable homes, employing tens of thousands in the industry requires a real commitment and several billions of cash. It can be done, but this government is too busy putting people out of work. If you seriously think this pathetic amount of money will change anything, sorry but you are seriously deluded. A little of nothing really does not go a long long way.
I agree with your comments G-Man, but in reality are we going to see house prices drop significantly, or caps put in place? In an ideal world that would be the way forward, but in reality...??
I also agree that mortgages at the LTV rates mentioned are ludicrous, but something needs to be done, and although this scheme is tiny compared to what it would need to actually solve the problem, it may still help stimulate at least some movement in the housing market.
Well, I agree with the use of money to renovate empty properties for council rent-out, but if I wanted to address the housing problems I'd also consider doing the following:
1) Penalise the owners of empty properties.
I'm not talking allowing 100% of council tax here, I'm saying make it 100% for the first 6 months a property is empty then 200% for the next 6 months then 300% for the next 6 months (and so on). This will penalise owners of multiple homes while generating a funding source that could be used to help the renovation scheme in (1). It'll also make rents come down as BTL investors will have an incentive to rent their properties to avoid the penalty and will also make prices come down as BTL investors sell off properties they are having trouble renting at the returns they'd want.
2) Cap BTL loans
Reduce the total amount loaned to BTL investors by 10% a year for the next 5 years and then keep it static. Redirect the loans to SMEs. This will boost employment, reduce competition between BTL investors and FTBs and reduce house prices as some BTL investors will need to sell if they can't remortgage.
3) Cap LTVs at 90%.
This'll help reduce banking risks and the threat of negative equity.
4) Cap profits on new build sales to 15%.
This'll help reduce prices and reduce the chances of negative equity. However, I'd also remove the 'roof tax' applied to new properties to further reduce the sale price to encourage purchasers.
5) End the sale of council tax housing.
We need more affordable rental properties, not less. Not only does allowing council renters to buy at a 50% discount remove affordable housing from the pot but's it's so insulting to anyone who's had to build up a deposit for a full price home while paying private sector rents!
6) Making squatting illegal.
Combined with the renovation scheme, this would bring many more properties back to the council and housing association rental books.
7) Allow FTBs a tax free account to save the deposit for their first home.
Early / alternative access would be allowed but the cash taken out would be subject to the taxation of the interest on that amount.
Where do I vote for G-Man for prime minister?
Great ideas, and all of which I agree with. Some are quite harsh, but target the people that need to be targeted.
If they implemented 1,2,6 and 7 then it would definitely go some way to solving the current issues that are plaguing the housing market.
3 is something that I think should be in place anyway, and I am surprised that this hasn't been forced after the CC.
I'm not sure 4 would be possible, as people would buy those properties purely to sell them on, knowing that market value would be higher due to the forced cap on initial price.
Nice post, its certainly got me thinking :-)
Totally agree with everything you say, G-Man.