Global bank strategist hits out at ‘that moron’ Gideon over Help to Buy

[sancho panza]

QUoting the legenedary bear Albert Edwards.Worth noting that Pie quotes the LSL data at the end.

 

http://www.propertyindustryeye.com/uk-housing-market-is-a-bubble-with-help-to-buy-pushing-up-prices-warns-bank-strategist/

'The UK housing market is a “bubble on a bubble” – and property prices, reported this morning to average over £302,000, are over-valued by around 12%.

The ‘bubble’ warning comes from Societe General global strategist Albert Edwards, who says the bubble has been inflated by a decade of loose monetary policy and, in particular, Help to Buy.

Edwards said: “What you are doing is lending them [buyers of new-build homes] more money backed by the taxpayer to push up house prices even more.”

He said that while US house prices had corrected back to normal levels after the financial crisis of ten years ago, the UK housing market had become a “bubble on top of the previous bubble”.

He said that the housing bubble could burst in the next recession, which he believes would also wipe 80% off the value of equities and herald a new “ice age”.

Edwards, who works for the French bank in London, said that it was a damaging myth that it is a lack of supply that is causing the UK housing crisis.

He blamed the “free money” of Quantitative Easing and Help to Buy, which he told yesterday’s Telegraph had been implemented under “that moron” Gideon.

Edwards said: “There’s a lot of stock there that could just be dumped on to the market. Nothing engenders selling more than falling prices.

Under Help to Buy, purchasers of new-build homes need put down only a 5% deposit, but can take out a 20% government loan to bring the total deposit to 25%. They are not charged fees on the loan for the first five years, but must then start paying interest. When the home is sold, the Government will reclaim its 20% stake plus a share of any increase in value.

Meanwhile the International Monetary Fund says that house prices in some of the world’s largest economies, including the UK, could be over-valued by as much as 12%, and separately this morning the Daily Telegraph’s front page story was a call to cut Stamp Duty “to end our housing disgrace”.

Boris Johnson said Treason May should cut “absurdly high” Stamp Duty and abandon affordable housing targets that developers currently have to meet.

The LSL Acadata survey reported this morning that the average house price in England and Wales now stands at £302,251 after a tiny monthly fall of 0.2%.

The figure, for July, is still up 1.6% on an annual basis.

In London, the average property price is £625,529 with annual falls in 21 out of the 33 boroughs.

Transactions during the month were an estimated 75,000, 2% down on June. In the first seven months of this year, transactions are thought to be 4% down on the same period last year.

There was also a 7% drop in sales in the second quarter of this year.

[Band]

He was one of many saying this about help to buy in 2013. Only people who weren't were the nations bubble blowers namely the LIBLABCON.

As pathetic as Boris's comment about SDLT is, as they have already cut it, he is bang on when stating developers shouldn't be building so called affordable housing, this should be the job of the govt/councils.

JRM has said about building council houses in the past, maybe theyll let their builder sponsors stop doing this and revert back to how it once was with the state building them.

As bad as theyll probably be i just want May ousted asap.

[Band]

Just read this in the DT ... seems the editors must have had a night off ... she talks about prices falling due to tightening of credit.

https://www.telegraph.co.uk/business/2018/08/13/fall-house-prices-just-beginning-bumpy-ride/

And this at the end of the article- This might be preferable to a policy of continuing to inflate the bubble (like Help to Buy),

No coincidence that Boris raised the 120mln bonus at Persimmons.

[Chewing Grass]

5 minutes ago, Banned said:

Just read this in the DT ... seems the editors must have had a night off ... she talks about prices falling due to tightening of credit.

https://www.telegraph.co.uk/business/2018/08/13/fall-house-prices-just-beginning-bumpy-ride/

And this at the end of the article- This might be preferable to a policy of continuing to inflate the bubble (like Help to Buy),

No coincidence that Boris raised the 120mln bonus at Persimmons.

I think the key warning signal is when the financial peeps say prices have plateaued.

That basically means they are already on the way down.

Huge oversupply of 2 bed flats and 3 bed new-builds round me, these are what most of todays FTBers are after as they don't have the skills or money to deal with older stock.

Consequently similar stuff without added extras like a big plot or plenty of parking are dropping in price.

The rub is also that the new-builds they have bought on HTB won't be worth what they are on the hook for.

[MrXxx]

9 hours ago, Banned said:

He was one of many saying this about help to buy in 2013. Only people who weren't were the nations bubble blowers namely the LIBLABCON.

As pathetic as Boris's comment about SDLT is, as they have already cut it, he is bang on when stating developers shouldn't be building so called affordable housing, this should be the job of the govt/councils.

JRM has said about building council houses in the past, maybe theyll let their builder sponsors stop doing this and revert back to how it once was with the state building them.

As bad as theyll probably be i just want May ousted asap.

You mean let the Govt build them so that they can sell them to the poor electorate who them sell them on for a quick buck and then complain that their offspring have no chance to buy and are at the mercy of the BTL brigade?!...lack of punctuation intended.

[PeptoAbysmal]

The first of the 5 year, HTB 20% loans are becoming due (40% for London).

I was looking at the statistics for the HTB loans, and it looks like the first few months in 2013 were quite sluggish with just over 800 loans made from October until the end of 2013.

The big year for HTB was 2014, with just over 38,000 sales made, followed by 2015 at just over 34,000 completions,  28,500 in 2016, and just over 3,000 in the first 6 months of 2017 (that's the last breakdown from UK  government figures).

The total number of loans made up until April 2018 has been just over 120,000.

You can see that the scheme has been tailing off (becoming markedly less popular) from 2015 onward.

From 2013 to Jun 2017, 107,000 thousand HTB loans were made.

Therefore, between July 2017, and April 2018, a mere 13,000 loans have been made.

One of the most popular areas for Help to Buy loans has been Central Bedfordshire. In other words Luton and Dunstable. I suspect a lot of those sales would be London commuters desperate to get out of more expensive towns like St. Albans, Harpenden, Hitchin, Welwyn Garden City, and Hatfield, and purchase a property (if I remember correctly there was significant house price inflation in Luton and Dunstable in the last few years, all fueled by the HTB monstrosity).

I wonder if the 38,000 worth of HTB sales made in 2014, will manifest financial problems in 2019?

I also heard of schemes being offered by local council that were similar (or were councils just using the HTB money and dressing it up as there own?). I remember talking to a receptionist at a local sports centre back in 2016, and her expressing unbridled joy at being able to purchase a £300,000 new build rabbit hutch with "a kind loan from the council" (she didn't seem like the sort of person who really understood what she was getting into, and I got the impression she thought it was free money).

If she was representative of the sort of people taking advantage of HTB, then I shall watch to see what happens with interest, particularly in 2019.

[leonardratso]

kind

[PeptoAbysmal]

3 minutes ago, leonardratso said:

kind

I don't follow.

[leonardratso]

1 minute ago, SuperTramp said:

I don't follow.

she thinks its kind, makes me laugh how stupid people are. i especially laugh at myself for being stupid enough to be so cynical of all this shit and not lap it up and to hell with the consequences, let someone else struggle after ive popped my clogs.

[MrXxx]

7 hours ago, leonardratso said:

she thinks its kind, makes me laugh how stupid people are. i especially laugh at myself for being stupid enough to be so cynical of all this shit and not lap it up and to hell with the consequences, let someone else struggle after ive popped my clogs.

Reminds me of the `kind` shark in the Eddie Izzard sketch about Noah`s Ark :-) :-) :-)

[A_P]

8 hours ago, SuperTramp said:

The first of the 5 year, HTB 20% loans are becoming due (40% for London).

I was looking at the statistics for the HTB loans, and it looks like the first few months in 2013 were quite sluggish with just over 800 loans made from October until the end of 2013.

The big year for HTB was 2014, with just over 38,000 sales made, followed by 2015 at just over 34,000 completions,  28,500 in 2016, and just over 3,000 in the first 6 months of 2017 (that's the last breakdown from UK  government figures).

The total number of loans made up until April 2018 has been just over 120,000.

You can see that the scheme has been tailing off (becoming markedly less popular) from 2015 onward.

From 2013 to Jun 2017, 107,000 thousand HTB loans were made.

Therefore, between July 2017, and April 2018, a mere 13,000 loans have been made.

One of the most popular areas for Help to Buy loans has been Central Bedfordshire. In other words Luton and Dunstable. I suspect a lot of those sales would be London commuters desperate to get out of more expensive towns like St. Albans, Harpenden, Hitchin, Welwyn Garden City, and Hatfield, and purchase a property (if I remember correctly there was significant house price inflation in Luton and Dunstable in the last few years, all fueled by the HTB monstrosity).

I wonder if the 38,000 worth of HTB sales made in 2014, will manifest financial problems in 2019?

I also heard of schemes being offered by local council that were similar (or were councils just using the HTB money and dressing it up as there own?). I remember talking to a receptionist at a local sports centre back in 2016, and her expressing unbridled joy at being able to purchase a £300,000 new build rabbit hutch with "a kind loan from the council" (she didn't seem like the sort of person who really understood what she was getting into, and I got the impression she thought it was free money).

If she was representative of the sort of people taking advantage of HTB, then I shall watch to see what happens with interest, particularly in 2019.

Great post, thanks for sharing the data.

If I recall correctly, years 6 and 7 aren't too bad. It's year 8 when it starts to ramp up. Definately the first year of the interest owed on the HTB bit isn't too much too stomach. Having said that there is a kicker. Most will find they're unable to remortgage and stuck with paying their new rate once that 5 year fixed ends.

 A colleague of mine ran into a HTB a year ago (move in date was Oct 2017, but bought in the spring iirc). This was after us having a discussion about why it was so bad, went through all the negatives etc. He didn't even know it was available to him. The FOMO on owning a home was that strong he went and bought one the weekend after, I kid you not . I think I shared somewhere else here last month the same estate are now offering bumper incentives. Houses still listed for the same price as when first launched. It's not even that big of an estate either. If I go on Zoopla, they're estimating a £10k decrease. But obviously that's not taking into consideration the full picture.

We have three or four estates up/going up and have been for over a year or so. One in the town in walking distance to the train station on the mainline had a big sales event on this weekend. They can't shift the properties. I took a walk in the estate in the summer and it had loud music playing, flags and clothes draped out of windows. Like why the hell would I spend £350k of my own money to live next to that crap.

 

[PeptoAbysmal]

5 hours ago, Admiral Pepe said:

Great post, thanks for sharing the data.

If I recall correctly, years 6 and 7 aren't too bad. It's year 8 when it starts to ramp up. Definately the first year of the interest owed on the HTB bit isn't too much too stomach. Having said that there is a kicker. Most will find they're unable to remortgage and stuck with paying their new rate once that 5 year fixed ends.

 A colleague of mine ran into a HTB a year ago (move in date was Oct 2017, but bought in the spring iirc). This was after us having a discussion about why it was so bad, went through all the negatives etc. He didn't even know it was available to him. The FOMO on owning a home was that strong he went and bought one the weekend after, I kid you not . I think I shared somewhere else here last month the same estate are now offering bumper incentives. Houses still listed for the same price as when first launched. It's not even that big of an estate either. If I go on Zoopla, they're estimating a £10k decrease. But obviously that's not taking into consideration the full picture.

We have three or four estates up/going up and have been for over a year or so. One in the town in walking distance to the train station on the mainline had a big sales event on this weekend. They can't shift the properties. I took a walk in the estate in the summer and it had loud music playing, flags and clothes draped out of windows. Like why the hell would I spend £350k of my own money to live next to that crap.

 

I wasn't aware of the loan particulars on HTB, so I'm going to do a bit more digging.

However, if your recollection is correct then we aren't likely to see any financial difficulties associated with HTB until at least 2021/2022.

This is government can kicking at its very best (I expect the government's assumption is that after 5-8 years the person with the HTB loan will be earning more and therefore the additional payments will not be a problem by then. It's just as likely in that period of time however, for families to have more children, and/or get divorced).

I'm wondering if the scheme popularity is tailing off because the inflation in property prices, caused by HTB, has put house prices out of reach even for those with an HTB loan.

From the story of your friend, and some anecdotes of my own, it would seem that the blind desperation/optimism for property, whatever the cost, is as strong as ever (I reckon some might donate a kidney or a pound of flesh if there was mortgage contract with those stipulations, out there).

The new build estate that you describe and some that I have seen lead me to instantly disavow any notion of purchasing a newly built property.

My three "favourite" new build estates are:

- Old Hendon aerodrome (more accurately situated in Colindale, as it's the other side of the M1), a huge number of new build blocks of flats. They whole estate looks awful because of the sheer density of the blocks of flats, but given another decade as these blocks age and begin to resemble soviet era Moscow flats for the proles, it will look particularly grim.

- Just west of Aylesbury, built on what looks suspiciously like a flood plain, underneath high voltage power lines.

- Chinnor Oxfordshire, built on top of a former chalk pit owned by a cement manufacturer (the houses are built on the shallower part of the chalk pit, however, at the back of the estate the remainder of the pit drops down into oblivion. There has been an attempt to grow trees on the barren remainder of the pits, but it still generally looks like the surface of the moon all delightfully viewable from the back windows of the homes on this estate).

The last two suffering from poor access roads that struggle to fit two cars either side, no front gardens, and a higgledy-piggledy mess of flats, next to terraces, next to town houses, and nowhere to park. I seem to remember one of the roads being so tight on one of these estates, that outside one house somebody had erected two steel bollards either side of the front door to guard against somebody driving through it.

Not to mention the build quality of newer housing, whereby a washing machine on spin cycle can cause the entire timber frame of a block of flats to shake, garages that are too small for an average size car, rooms that are cramped even before adding storage space, and often a second or third bedroom that is really just a large cupboard.

And all that, on top of a few bad apples living on housing benefit, or in social housing (I say that as if it doesn't equate to very much, however living next door to an inconsiderate household is extremely stressful).

I hope your friend doesn't live to regret his decision.

[PeptoAbysmal]

14 hours ago, leonardratso said:

she thinks its kind, makes me laugh how stupid people are. i especially laugh at myself for being stupid enough to be so cynical of all this shit and not lap it up and to hell with the consequences, let someone else struggle after ive popped my clogs.

It is pretty galling when you sit down to think about it. But for the grace of a central banker/whim of a politician these same people could be out on the street within a few months, whilst some of them are simultaneously thinking they're shrewd property investors.

I try not to think about, and I keep my opinions on this subject matter to myself when in company (apart from to say that I think property prices being so high are not good for anyone apart from builders and bankers). I've made my own arrangements and have tried to make the best of a very difficult economic situation, as I don't wish to end up like the rather tragic character in Bleak House, Miss Flite, solely focused on waiting for a specific event, outside my control, to transform my fortunes, that either, never materialises, or is at least too late to be of any practical use, and failing to live in the mean time.

N.B. That's not to say that you are, it's certainly something I was guilty of in the 2 or 3 years leading up to, and after, the financial crisis of 2008. I've tried to be more optimistic, and think, "Ok, it's not an ideal economic situation, and it's certainly not fair, but I can't do nothing, so what's the best way to deal with it?"

[A_P]

@SuperTramp Also worth noting with the HTB loan that I would hazard a guess few are even paying it down or have the capcity to even save for it. To do so you need to pay in 10% chunks, so for most that's 50% of the borrowed amount. Even if they wanted to do so they would need to get the house valued so it's a right pain.

Although the first year might not be much of an increase in terms of the HTB equity loan, when added with their fixed rate going, increases in interest rates, inflation everywhere else the pinch will be felt. With only 800 I don't think we will hear two much about it, however, come next year as the original 800 get their second increase and the big batch get their first payment it will probably be a different story. I wouldn't be surprised if it ends up being some mis-selling scandal as most won't know what they've signed up to. At the time it took me a while to get my head around how the equity loan charges worked after the interest free period. There's no way your average joe would care to look. They certainly don't put it in plain english for folk. I think I've just given myself an idea for a little project

22 minutes ago, SuperTramp said:

Not to mention the build quality of newer housing, whereby a washing machine on spin cycle can cause the entire timber frame of a block of flats to shake, garages that are too small for an average size car, rooms that are cramped even before adding storage space, and often a second or third bedroom that is really just a large cupboard.

And all that, on top of a few bad apples living on housing benefit, or in social housing (I say that as if it doesn't equate to very much, however living next door to an inconsiderate household is extremely stressful). 

The build quality is the absolute kicker with these homes. They're a disgrace. I've lost count how many times my colleague had someone round. He puts a good spin on it though, "I've gotten really pally with the site manager so can always get things fixed quickly" .

[A_P]

Quote

After five years you will be required to pay an interest fee of 1.75% of the amount of your Help to Buy shared equity loan at the time you purchased your property, rising each year after that by the increase (if any) in the Retail Prices Index (RPI) plus 1%. The loan itself is repayable after 25 years or on the sale of the property if earlier. Other payments and charges You must pay a monthly management fee of £1 per month from the start of the loan until it is repaid

 

[A_P]

I think my sums are correct, but please correct me if wrong. Doesn't take into consideration house value changing. Not life changing amounts but when people are already stretched an extra £100 a month might be all it takes to start the downward spiral

London Isn't looking so pretty

[PeptoAbysmal]

1 hour ago, Admiral Pepe said:

I think my sums are correct, but please correct me if wrong. Doesn't take into consideration house value changing. Not life changing amounts but when people are already stretched an extra £100 a month might be all it takes to start the downward spiral

Oh I see, so the percentage interest charge increases by RPI + 1% every year after 5 years.

So, a 1.75% interest rate charge on the HTB equity loan after 5 years, increases by (assuming RPI inflation is 5%) by 6%, to 1.86% in year 6, and so on.

I just had a first read of the HTB small print, and the best is the bit about paying off the equity loan.

Firstly, if the value of the house goes up, then total amount payable on the equity loan goes up at the same rate as the increase in house price (i.e. an initial purchase of a £150,000 property, with a 20% HTB loan of therefore £30,000, will increase to £33,000, should house prices increase by 10%).

Secondly, if someone with one of these loans wants to pay off the HTB equity loan, then the minimum payment is 10% of the current valuation of the property, not 10% of the equity loan (better if house prices fall, not so good if prices rise, which is pretty likely if we accept that HTB loans cause house price inflation).

Even a small HTB equity loan, of say £30,000 (i.e. 20% of a property purchased for £150,000), assuming the price of the house stays the same, the buyer is forced to pay back a minimum of £15,000 on the HTB equity loan, or not at all, and therefore face the full cost of the interest charges.

The London figures look even worse, given the greater sums of money involved (half a million has not been unusual, even just for 2  bedroom flats in Greater London), and particularly if a 40% HTB equity loan was taken "advantage" of.

The fees for missing payments do not look good either, £100 for missing a payment, and £600 for non-payments being passed to a debt collection agency.

Given that everyone seems to live on their credit card these days, and that people will be asked to save large sums of money in order to pay down the HTB equity loan (even on properties at the bottom end of the market), this appears to be a financial car crash in the making.

I've just learned that this crazy scheme is now set to continue until 2023, however, the government have placed absolute caps on the amount they are prepared to lend for each property purchase (a tacit admission from the government that HTB has caused property price inflation, despite previous claims that they would be vigilant for any signs that this scheme would cause prices to increase).

What a mess.

[UnconventionalWisdom]

3 hours ago, Admiral Pepe said:

I think my sums are correct, but please correct me if wrong. Doesn't take into consideration house value changing. Not life changing amounts but when people are already stretched an extra £100 a month might be all it takes to start the downward spiral

London Isn't looking so pretty

I might be missing something, but what is the total? In both sheets the annual fees amount to more the the total when summed. Seems to be worst than those figures... In any case, that extra ~£500 will hurt a lot of people

[A_P]

11 minutes ago, UnconventionalWisdom said:

I might be missing something, but what is the total? In both sheets the annual fees amount to more the the total when summed. Seems to be worst than those figures... In any case, that extra ~£500 will hurt a lot of people

No you're not missing something. You were on the ball. For some reason the autosum didn't sum the whole column. My bad, did it in a rush

Correct totals are:

£14,020 and £46,313

[leonardratso]

4 hours ago, SuperTramp said:

It is pretty galling when you sit down to think about it. But for the grace of a central banker/whim of a politician these same people could be out on the street within a few months, whilst some of them are simultaneously thinking they're shrewd property investors.

I try not to think about, and I keep my opinions on this subject matter to myself when in company (apart from to say that I think property prices being so high are not good for anyone apart from builders and bankers). I've made my own arrangements and have tried to make the best of a very difficult economic situation, as I don't wish to end up like the rather tragic character in Bleak House, Miss Flite, solely focused on waiting for a specific event, outside my control, to transform my fortunes, that either, never materialises, or is at least too late to be of any practical use, and failing to live in the mean time.

N.B. That's not to say that you are, it's certainly something I was guilty of in the 2 or 3 years leading up to, and after, the financial crisis of 2008. I've tried to be more optimistic, and think, "Ok, it's not an ideal economic situation, and it's certainly not fair, but I can't do nothing, so what's the best way to deal with it?"

oh, im not living like that, its analogous to being overtaken on the motorway by someone doing 120MPH while i trundle along at 60, in 5 miles i will be passing them as they are wracked up on the central reservation in 3 pieces. Im not really too bothered by it all, i have my moments but they pass and i just get on with it and dont let it get to me. I cant stay enraged (or even depressed) for long, too much like hard work.

[Hardhat]

5 hours ago, SuperTramp said:

"Ok, it's not an ideal economic situation, and it's certainly not fair, but I can't do nothing, so what's the best way to deal with it?"

I'm definitely of the same way of thinking. You can only play the hand you're dealt a lot of the time. But even to realise that much puts you a long way ahead of a lot of people.

[SillyBilly]

5 hours ago, SuperTramp said:

 

The last two suffering from poor access roads that struggle to fit two cars either side, no front gardens, and a higgledy-piggledy mess of flats, next to terraces, next to town houses, and nowhere to park. I seem to remember one of the roads being so tight on one of these estates, that outside one house somebody had erected two steel bollards either side of the front door to guard against somebody driving through it.

Not to mention the build quality of newer housing, whereby a washing machine on spin cycle can cause the entire timber frame of a block of flats to shake, garages that are too small for an average size car, rooms that are cramped even before adding storage space, and often a second or third bedroom that is really just a large cupboard.

And all that, on top of a few bad apples living on housing benefit, or in social housing (I say that as if it doesn't equate to very much, however living next door to an inconsiderate household is extremely stressful).

I hope your friend doesn't live to regret his decision.

Honestly don't understand why anyone would pay a premium for a new build. In the Midlands where I monitor house prices you can buy a lovely well built 80s detached with ample parking, front and back garden (decent size) and 3 double sized bedrooms for £230k. Literally 2 mins down the road, the sort of mess you describe has popped up. A "similar" 3 bed detached has about 10 square metres less in space, obviously this space has been pinched from two of the bedrooms and the lounge which are tiny in comparison. No front garden whatsoever (1M, a bush and a fence if you are lucky, if not you walk out onto the street) postage stamp back garden, space for 1 car only to park on the drive, housing density about twice as much given roads are about 2/3 the width of the older estate and the houses are spaced literally a path space between one another (2M or so). About £30k more. Give it 10 years when the render is stained algae green and the weeds are popping up between the badly paved drive and cars all over the pavements who the f**k would want to live there? I'd go older all the time.

[Bricks & Mortar]

1 hour ago, SillyBilly said:

I'd go older all the time.

The key thing is the insulation. 
IF the modern house has been insulated to current regs, (and I've seen plenty where it's been missed out), - then you probably see that 30K off your heating bills soon enough.

But I'd still go older.  Just look for the ones you can easily insulate.

[sancho panza]

On 05/11/2018 at 00:56, SuperTramp said:

The first of the 5 year, HTB 20% loans are becoming due (40% for London).

I was looking at the statistics for the HTB loans, and it looks like the first few months in 2013 were quite sluggish with just over 800 loans made from October until the end of 2013.

The big year for HTB was 2014, with just over 38,000 sales made, followed by 2015 at just over 34,000 completions,  28,500 in 2016, and just over 3,000 in the first 6 months of 2017 (that's the last breakdown from UK  government figures).

The total number of loans made up until April 2018 has been just over 120,000.

You can see that the scheme has been tailing off (becoming markedly less popular) from 2015 onward.

From 2013 to Jun 2017, 107,000 thousand HTB loans were made.

Therefore, between July 2017, and April 2018, a mere 13,000 loans have been made.

One of the most popular areas for Help to Buy loans has been Central Bedfordshire. In other words Luton and Dunstable. I suspect a lot of those sales would be London commuters desperate to get out of more expensive towns like St. Albans, Harpenden, Hitchin, Welwyn Garden City, and Hatfield, and purchase a property (if I remember correctly there was significant house price inflation in Luton and Dunstable in the last few years, all fueled by the HTB monstrosity).

I wonder if the 38,000 worth of HTB sales made in 2014, will manifest financial problems in 2019?

I also heard of schemes being offered by local council that were similar (or were councils just using the HTB money and dressing it up as there own?). I remember talking to a receptionist at a local sports centre back in 2016, and her expressing unbridled joy at being able to purchase a £300,000 new build rabbit hutch with "a kind loan from the council" (she didn't seem like the sort of person who really understood what she was getting into, and I got the impression she thought it was free money).

If she was representative of the sort of people taking advantage of HTB, then I shall watch to see what happens with interest, particularly in 2019.

Thanks for the data,I hadn't realised that there was such a drop off after 2014.As if they got a first round of mugs and then the patsies have dried up.

20 hours ago, SuperTramp said:

It is pretty galling when you sit down to think about it. But for the grace of a central banker/whim of a politician these same people could be out on the street within a few months, whilst some of them are simultaneously thinking they're shrewd property investors.

I try not to think about, and I keep my opinions on this subject matter to myself when in company (apart from to say that I think property prices being so high are not good for anyone apart from builders and bankers). I've made my own arrangements and have tried to make the best of a very difficult economic situation, as I don't wish to end up like the rather tragic character in Bleak House, Miss Flite, solely focused on waiting for a specific event, outside my control, to transform my fortunes, that either, never materialises, or is at least too late to be of any practical use, and failing to live in the mean time.

N.B. That's not to say that you are, it's certainly something I was guilty of in the 2 or 3 years leading up to, and after, the financial crisis of 2008. I've tried to be more optimistic, and think, "Ok, it's not an ideal economic situation, and it's certainly not fair, but I can't do nothing, so what's the best way to deal with it?"

Me and Mrs P rent for a variety of financial reasons-and whilst it's not ideal particualrly ref security of tenure,we're happy with our risk profile.

1 cost-our rent is 3% gross yield.

2 we can move in a month

3 cost of a house is absurd for a hellhole like Leicester

4 gives me an opportunity to do other things with the capital,keeps us liquid till we retire.

5 any IR risk is the LL's.

20 hours ago, Admiral Pepe said:

@SuperTramp Also worth noting with the HTB loan that I would hazard a guess few are even paying it down or have the capcity to even save for it. To do so you need to pay in 10% chunks, so for most that's 50% of the borrowed amount. Even if they wanted to do so they would need to get the house valued so it's a right pain.

Although the first year might not be much of an increase in terms of the HTB equity loan, when added with their fixed rate going, increases in interest rates, inflation everywhere else the pinch will be felt. With only 800 I don't think we will hear two much about it, however, come next year as the original 800 get their second increase and the big batch get their first payment it will probably be a different story. I wouldn't be surprised if it ends up being some mis-selling scandal as most won't know what they've signed up to. At the time it took me a while to get my head around how the equity loan charges worked after the interest free period. There's no way your average joe would care to look. They certainly don't put it in plain english for folk. I think I've just given myself an idea for a little project

The build quality is the absolute kicker with these homes. They're a disgrace. I've lost count how many times my colleague had someone round. He puts a good spin on it though, "I've gotten really pally with the site manager so can always get things fixed quickly" .

Soem salient points throughout.Also worth noting that LCP Acadata put new build premium at 16% on a new house.As soon as you move in,you're effectively taking a loss over the medium term ie ten years.,versus buying an older cheaper property.

19 hours ago, Admiral Pepe said:

I think my sums are correct, but please correct me if wrong. Doesn't take into consideration house value changing. Not life changing amounts but when people are already stretched an extra £100 a month might be all it takes to start the downward spiral

London Isn't looking so pretty

Incredible to see the data ,I jsut wonder who on earth could have thought this was a good idea.

Interesting to note they';re using RPI for IR charges rather the normally lower CPI(which msot pay rises are based on).

17 hours ago, SuperTramp said:

Oh I see, so the percentage interest charge increases by RPI + 1% every year after 5 years.

So, a 1.75% interest rate charge on the HTB equity loan after 5 years, increases by (assuming RPI inflation is 5%) by 6%, to 1.86% in year 6, and so on.

I just had a first read of the HTB small print, and the best is the bit about paying off the equity loan.

Firstly, if the value of the house goes up, then total amount payable on the equity loan goes up at the same rate as the increase in house price (i.e. an initial purchase of a £150,000 property, with a 20% HTB loan of therefore £30,000, will increase to £33,000, should house prices increase by 10%).

Secondly, if someone with one of these loans wants to pay off the HTB equity loan, then the minimum payment is 10% of the current valuation of the property, not 10% of the equity loan (better if house prices fall, not so good if prices rise, which is pretty likely if we accept that HTB loans cause house price inflation).

Even a small HTB equity loan, of say £30,000 (i.e. 20% of a property purchased for £150,000), assuming the price of the house stays the same, the buyer is forced to pay back a minimum of £15,000 on the HTB equity loan, or not at all, and therefore face the full cost of the interest charges.

The London figures look even worse, given the greater sums of money involved (half a million has not been unusual, even just for 2  bedroom flats in Greater London), and particularly if a 40% HTB equity loan was taken "advantage" of.

The fees for missing payments do not look good either, £100 for missing a payment, and £600 for non-payments being passed to a debt collection agency.

Given that everyone seems to live on their credit card these days, and that people will be asked to save large sums of money in order to pay down the HTB equity loan (even on properties at the bottom end of the market), this appears to be a financial car crash in the making.

I've just learned that this crazy scheme is now set to continue until 2023, however, the government have placed absolute caps on the amount they are prepared to lend for each property purchase (a tacit admission from the government that HTB has caused property price inflation, despite previous claims that they would be vigilant for any signs that this scheme would cause prices to increase).

What a mess.

Interesting to note the penalty fees can rack up so quickly.

15 hours ago, leonardratso said:

oh, im not living like that, its analogous to being overtaken on the motorway by someone doing 120MPH while i trundle along at 60, in 5 miles i will be passing them as they are wracked up on the central reservation in 3 pieces. Im not really too bothered by it all, i have my moments but they pass and i just get on with it and dont let it get to me. I cant stay enraged (or even depressed) for long, too much like hard work.

Nice analogy.

 

13 hours ago, Bricks & Mortar said:

The key thing is the insulation. 
IF the modern house has been insulated to current regs, (and I've seen plenty where it's been missed out), - then you probably see that 30K off your heating bills soon enough.

But I'd still go older.  Just look for the ones you can easily insulate.

That's wise advice B&M,you still working in the trrade at the mo?

10 hours ago, Democorruptcy said:

In Oct 2016 I did a Freedom of Information request to the Homes and Communities Agency including these Q&A's about houses already re-sold

How many of the houses sold, were sold at a loss, based on the previous sold price?
420 of the 4,051 properties were sold at a loss, based on the previous sale price (the
remaining 122 were sold at no profit or loss).

How much money has the Treasury lost on houses re-sold at a loss?
From the 420 sales at a loss, the total loss was £1,007,772 against the original investment.

Impressive effort by the govt.I'd be interested to nkow the geogrpahical split of the losses going forward .

Going off Supretramps analysis,that 4051/120,000,so rougholy 3% have been sold.I can foresee a situation where these houses will be in deep negative equity,I wonder whether the govt will stop remortgaging if it can't be paid?

[A_P]

While searching for some HTB data using DuckDuckGo, it does throw up some interesting results that would unlikely to have appeared with a google search.

Interesting thread from some "normies"

https://forums.overclockers.co.uk/threads/any-help-to-buy-customers-paid-off-the-loan-or-added-it-to-mortgage-yet.18827062/

HTB in Ireland

http://www.moneyguideireland.com/help-buy-scheme-first-time-buyers.html