Housing and Help to Buy

[YorkshireMartin]

I wonder if geography plays a part in what choice is offered, as in the location of the sites themselves. I can't imagine a new development in the south east where Help to Buy is offered on all plots, it wouldn't make commercial sense to tie up the prime plots with protracted financing arrangements, if indeed help to buy could be considered as such. I'm basing that on the fact that anything involving the government is generally slow going.

 

[Terry - Somerset]

There seem to be two factors driving house prices - low interest rates making repayments cheaper, and limited supply. Providing subsidies to buyers through help to buy etc changes neither of these constraints.

- low interest rates mean that for a given repayment, a larger loan can be afforded pushing prices up. In some respects this probably does not matter, except that deposits demanded by lenders increase creating problems for first time buyers. Lenders have become much more stringent in assessing incomes and deposit requirements - generally good as borrowers with very high loan to income ratios are vulnerable to interest rate rises.

- limited supply of new housing does not meet the needs of an increasing population. Accepting this as a fact (rather than an opportunity for a debate about immigration) means that any subsidy the government provides to house buyers simply drives up demand for property and increases prices further. The idea that buy to let is the problem and potential solution is flawed. Recent tax and stamp duty increases on landlords may make BTL less attractive, but will not increase the housing supply as those currently renting will need to become house buyers.

Conclusion - on balance subsidies to house buyers produces no general benefit (although individuals may benefit). Subsidies likely have the effect of increasing prices by increasing affordability, and possibly increasing developer profits through higher prices.

The solution is of course to build more - not attractive to NIMBYS (probably like me). But if combined with a government strategy to attract new business to areas with lower house prices through infrastructure development and subsidies it may be a win-win for the economy, jobs and fulfil the housing need..

 

[Bodgers]

Generally agree, I think instead of shoring up house builder's profit margins and house prices, the money should be spent in backing banks on lower LTA mortgages for first time buyers.

Planning laws need updating. The government also need to do more to encourage builder's to build houses that have decent sq meter sizes. Abandon the idea of squeezing as many properties on to a bit of land as they can. Even the Japanese have larger room sizes than the UK. It is a quality of life thing.


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[YorkshireMartin]

There seem to be two factors driving house prices - low interest rates making repayments cheaper, and limited supply. Providing subsidies to buyers through help to buy etc changes neither of these constraints.

- low interest rates mean that for a given repayment, a larger loan can be afforded pushing prices up. In some respects this probably does not matter, except that deposits demanded by lenders increase creating problems for first time buyers. Lenders have become much more stringent in assessing incomes and deposit requirements - generally good as borrowers with very high loan to income ratios are vulnerable to interest rate rises.

- limited supply of new housing does not meet the needs of an increasing population. Accepting this as a fact (rather than an opportunity for a debate about immigration) means that any subsidy the government provides to house buyers simply drives up demand for property and increases prices further. The idea that buy to let is the problem and potential solution is flawed. Recent tax and stamp duty increases on landlords may make BTL less attractive, but will not increase the housing supply as those currently renting will need to become house buyers.

Conclusion - on balance subsidies to house buyers produces no general benefit (although individuals may benefit). Subsidies likely have the effect of increasing prices by increasing affordability, and possibly increasing developer profits through higher prices.

The solution is of course to build more - not attractive to NIMBYS (probably like me). But if combined with a government strategy to attract new business to areas with lower house prices through infrastructure development and subsidies it may be a win-win for the economy, jobs and fulfil the housing need..

But is there really a shortage of housing? I'm not so sure. I'm starting to think it's a little bit like when we were told diesel vehicles were a great idea....There might be a shortage of "affordable" housing, whatever that is.

Whilst headline interest rates on mortgages are low at the moment, having a mortgage pegged at 3%-5% or whatever above base rate once in SVR is financial suicide for most, particularly if the mortgage is large relative to income, as a lot are. There is no longer a reasonable likelihood of remortgage for a lot of people either, so that escape is a treacherous path.

I don't think people are stupid, and I think the above is whats holding the market back more than anything else, hence my enquiry for views on help to buy, which I can't make my mind up on.

As I've said before, I'm no expert, not by a long chalk, but surely to goodness this is the number 1 problem in regards to mortgage lending. The base rate is low, but the rates for mortgages, comparatively, are not. I can't say for sure, but I think we are one of the only European countries without strict controls on mortgages. If I put my tin foil hat on, I'd say it's because over the years, in exchange for industry, we got banking, so if we upset them with caps on lending rates, we'd really be up the creek. I say this as somewhat of a capitalist too.

Hmm.

 

[Graham Orm]

The HTB scheme got my daughter and her husband into a lovely new home that they couldn't have afforded to buy otherwise. We looked closely at the scheme and all (including her in-laws) agreed it was a sensible and easily managed method. They're now expecting their first child, something they wouldn't commit to whilst in their previous rented flat.

 

[Bodgers]

There seem to be two factors driving house prices - low interest rates making repayments cheaper, and limited supply. Providing subsidies to buyers through help to buy etc changes neither of these constraints.

- low interest rates mean that for a given repayment, a larger loan can be afforded pushing prices up. In some respects this probably does not matter, except that deposits demanded by lenders increase creating problems for first time buyers. Lenders have become much more stringent in assessing incomes and deposit requirements - generally good as borrowers with very high loan to income ratios are vulnerable to interest rate rises.

- limited supply of new housing does not meet the needs of an increasing population. Accepting this as a fact (rather than an opportunity for a debate about immigration) means that any subsidy the government provides to house buyers simply drives up demand for property and increases prices further. The idea that buy to let is the problem and potential solution is flawed. Recent tax and stamp duty increases on landlords may make BTL less attractive, but will not increase the housing supply as those currently renting will need to become house buyers.

Conclusion - on balance subsidies to house buyers produces no general benefit (although individuals may benefit). Subsidies likely have the effect of increasing prices by increasing affordability, and possibly increasing developer profits through higher prices.

The solution is of course to build more - not attractive to NIMBYS (probably like me). But if combined with a government strategy to attract new business to areas with lower house prices through infrastructure development and subsidies it may be a win-win for the economy, jobs and fulfil the housing need..

But is there really a shortage of housing? I'm not so sure. I'm starting to think it's a little bit like when we were told diesel vehicles were a great idea....There might be a shortage of "affordable" housing, whatever that is.

Whilst headline interest rates on mortgages are low at the moment, having a mortgage pegged at 3%-5% or whatever above base rate once in SVR is financial suicide for most, particularly if the mortgage is large relative to income, as a lot are. There is no longer a reasonable likelihood of remortgage for a lot of people either, so that escape is a treacherous path.

I don't think people are stupid, and I think the above is whats holding the market back more than anything else, hence my enquiry for views on help to buy, which I can't make my mind up on.

As I've said before, I'm no expert, not by a long chalk, but surely to goodness this is the number 1 problem in regards to mortgage lending. The base rate is low, but the rates for mortgages, comparatively, are not. I can't say for sure, but I think we are one of the only European countries without strict controls on mortgages. If I put my tin foil hat on, I'd say it's because over the years, in exchange for industry, we got banking, so if we upset them with caps on lending rates, we'd really be up the creek. I say this as somewhat of a capitalist too.

Hmm.

You can get 2 year deals for 1.5 to 1.9 percent at the moment - but that's at LTV s of 60% or better. 2008 is not forgotten by the banks.




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