The government is keen to help people own their own home. They are improving the discounts available for those who want to buy their Council house. They have launched a scheme to provide a guarantee for extra mortgage borrowing for people who do not have a large deposit to put down. This means that you can buy a home with a cash deposit of 5% of the total value, rather than having to save up 25% of the cost of the house.
As always such schemes bring their critics. We hear the old argument that if someone buys a Council house there is one less house available. That is nonsense, as the same family stays living in the same house. The difference is that family will not have to pay rent in their old age, when the mortgage is paid off. Meanwhile the Council has a sum of money from the sale to help it provide more housing.
We hear the new argument that helping people with the deposit is irresponsible, as it will boost house prices and put them into too much debt. This is a misunderstanding of the scheme. The bank or Building Society offering the mortgage still has to make the appropriate checks on income and capacity to pay the interest. Of course people taking out mortgages should think about what happens if interest rates go up in due course. We are going to need more houses in our country, and that means we need people able to afford to buy the new homes currently being built so builders will think it worthwhile building some more. House prices are still below the peak levels they reached in boom of 2007, when the banks were allowed to lend too much and fuel too big a house price explosion.
There are many people living in rented accommodation who would like to own their own home. Doing so gives you much more freedom over how to improve and decorate your property. It lifts from you the fear of paying the rent in your old age. There are not many people in their own home who want to rent, and little stopping them from doing so if they wish. I hope more of my constituents will be able to afford to buy their own home. It is an important change in many people’s lives, and gives people more freedom once they have managed it.
February 11, 2014
There is no doubt that over time interest rates will rise especially at this time of very low BoE interest rate. So hopefully mortgage lenders consider that in their calculation when lending. If not or if the rise is greater than anticipated we will have a situation that many will fall behind on their payments or use equity(assuming house prices continue to rise) as they often did in the past to keep afloat. Either way many buyers of today will not have paid of their mortgages or have reverted to renting by the time they retire. Interfering in markets is a very dangerous as RedEd will do in abundance when he becomes PM and will result in short term gain turning into long term pain.
February 11, 2014
“This means that you can buy a home with a cash deposit of 5% of the total value”
Plus 3% stamp duty, of course!
The key to the housing crisis is to build more houses, and damn the NIMBYs!