And here lies the problem BBC NEWS | UK | Home buyers weigh up aid measures

Leanne Donaldson, 28, an administrator, and her partner Paul Langford, 25, an IT worker, are in danger of losing their home in Cheshire.

They are struggling to keep up with the cost of living and fear negative equity if they sell their two-bedroom house.

The first-time buyers, who earn a combined total of £30,000, purchased their home in September 2007 for £116,500, opting for a five-year mortgage deal with Northern Rock, at a fixed rate of 5%. They borrowed £122,500. Repayments cost them £800 per month.

 

Yes ok thanks. That must be a help then but they say just for a year at the moment.

Les

 

Anyone who could not afford to buy a house for the sake of £1750 would surely have offered £2000 below the asking price and made the purchase. Can't see this having any effect at all.

HMG benefits from all the tax take during a buoyant housing market, would have thought they'd have their brightest brains poring over the problem.

 

No stamp duty at all didn't stop the last crash.

Presumably anything up to £225k will be fairly quickly written down to <£175k to sell. This may actually speed up the decline? What about deals about to go through at £175-200k?

I wondered how these 30% interest free loans for 5 years to households with income less than £60k will work. What happens if the house loses 30% in value and is sold? Does the government/builder backed interest free loan get written down by 30% or 100%? I object to my taxes being used to prop up builders and sucker in poor first time buyers anyway.

I wonder whether this incentive will help to crash non-new build properties in the sub £200k bracket, along with the double whammy of stamp duty?

 

I haven't read the detail, John, but why would those loans be written down by any % ? Surely they're repayable in full whatever the value of the house at maturity, and if the borrower defaults, the repossession proceeds are divvied up pro rata? No?

 

I hope so, but I don't think there is any detail to read. Maybe I misunderstood some of the things I read that were suggesting the outrageous situation that the taxpayer would be liable for the write downs...

I think it is a bit risky the government/builders lending 30% of the value interest free and a mortgage lender supplying the other 70%. What equity has the individual got in there to keep them in the house if it loses further value? They might be tempted to hand back the keys because of the negative equity just like is happening in the US with high LTV mortgages?

Couldn't it get confusing if the lender and the government have charges over the property? If I was a lender, I would be much happier if the borrower had 30% of their own equity in the house rather than borrowing it from the government interest free. If this crash lasts as long as some others there could be a nasty payment shock like an ARM reset in 5 years as well when the interest free period ends. It all seems like a daft attempt at market manipulation to stop what is natural unwinding. There will be many unintended consequences I fear, none good for the country overall.

Perhaps if the government do a lot for a small number of people they can then boast about it in an attempt to get re-elected?

 

I agree, it's almost as if they're inventing a British version of Freddie Mac or Fannie Mae. Obviously the lessons learned in the USA haven't made it across the Atlantic yet.

 

This government is so obviously on the way out.
That being the case, why can't they make a few statesman like decisions rather than flounder about trying in vain to get re-elected.
For me all Labour will leave as a legacy is p1ssheads smoking outside pubs (in a street near you), the fond memory of Iraq and the consequences of years of big spending superimposed on a recession.
Cheers boys.

 

'Cos they're still on holiday, 'till October!

 

I'm not so sure this policy will not achieve what it set out to. For once they may have been smarter than we take them for. Firstly they leaked the fact that they were going to do something. Which of course means that people are going to stop buying while they wait for an announcement on the new measures. The of course makes the figures look a little worse.

Then they release the new measures. The measures of course don't really cost the government that much. But, importantly, the people who were going to buy now have the certainty of knowing what the new position is. So they now actually do go ahead and purchase.

I think we will see the number of sales jump up, the question will be if the jump is sufficient to combat the negative trend. Either way I think it was a cheap way to put a pause on the market, so that the impending sales "rush" may make people feel more positive and spark the market off again.

We shall see, but I do know of a few people who have been waiting for these announcements before going shopping for new opportunities.

 

Government tinkering again Thought they would have learnt their lesson from other recent ****-ups. Fact is a great number of people out there have over-borrowed caused by banks offering mortgages of numerous multiples of salaries which with higher interest rates are becoming unaffordable. This has had the effect of over-inflating prices, what is going on is just a correction, tough on those who bought last year at the peak but if they hadn't overstrethed they wouldn't have a problem.
Owning a house is a responsibility, not a right. As with anything else in life, if you can't afford it, you can't have it!

 

Fookin' Ell

Our mortgage costs us £2.2K a month - Pension £1.6K a month (I sure as hell need to keep working for the next 10 years at the very least)

My concern is that the £1.6K Pension money might just evaporate.

Wifey went for Blue chip 80% medium risk 20%
I went for Medium risk 40% High risk 60%

 

Thats a frightening mortgage to my mind! I just hope for your sake that your job doesn't evaporate. And you are right to worry about your eventual pension.

Les

 

They have a 5 year deal, so nothing is different for them expect IF they decide to sell. If they have a fixed mortgage then there payments will be no different to when they started the mortgage, if it's a tracker, well rates are lower now so they would be better off.

So what's different? other costs, yes utilities etc, but what has that got to do with the mortgage they took out a year ago? Bearing in mind the problem they were commenting on was the governments help in the housing market.

Fact is simple, they over stretched, now they blame the mortgage they have dispite this being probably the only thing that has remained a constant cost.