In fact, I was going to write a completely different post altogether.
But I have just used Rightmove’s calculator on how Help to Buy (the mortgage guarantee scheme launching in January 2014) could help buyers. Having used the calculator I have just one thing to say: FREE MONEY
That’s how this scheme makes home buying look.
With just a £5,000 deposit you could buy a property for £100,000. Raise a £30,000 deposit and you could buy a property for £600,000. Which when I selected the exorbitant London area buys so many properties even the uber-powerful Rightmove search engine broke down and spluttered at the sheer choice available.
Stunned I was.
Unlike the Equity Loan scheme (launched April 2013) which only applies to new-build properties, the Mortgage Guarantee Scheme includes new and old properties. And there’s no complicated equity stake arrangements which would require the genius of Brian Cox to fathom.
This is purely and simply show you can afford the mortgage, get a 5% deposit and then hey presto you can buy your dream property for up to £600,000.
It’s that simple. No saving for years to get a big deposit – that’s where the scheme kicks in. The government will guarantee lenders against a fall in prices of up to 15% which will encourage lenders to offer more 95% mortgages.
So now you can take out a higher-loan-to-value mortgage than you would have ever thought possible. And the government will guarantee it.
Which I have to say is truly and utterly remarkable.
And reminds me so much of the high-loan-to-value mortgages which got us into this sticky, stinking financial mess in the first place.
Fortunately, and I mean fortunately people will not be able to use the mortgage guarantee scheme to buy second homes and lenders will be required to collect a declaration stating that the borrower has no interest in a property anywhere else in the world.
Which I believe is a really good thing. Because this has got to be for those home owners who need it – and I mean need it.
Personally I am divided on this idea. On the one hand, I think it’s fantastic to enable people to get on the property ladder and this scheme looks an absolute godsend for those who have yet to save sufficient deposit to do so. On the other, this scheme is creating more debt for people and encouraging them to spend more money they haven’t got and, by default teaching them there is no need to save for the future.
In truth I am concerned by the “instant gratification” mentality which pervades so much of our current culture. We are no longer willing to wait for good things to happen. We want good things to happen now. And we expect good things to happen now. We have been fed a stream of our lives as some sort of Big Brother montage. A tableau where everything we want now can happen now.
We demand it.
We expect it.
And as L’Oreal would say: “Because we’re worth it”.
Accepting what we can and cannot have has gone out of the window. Expecting what we should have and are entitled to is now the order of the day. Gone are the days when we “made do” – that was for our parent’s generation. That is not us. Us, we, you, me today, I deserve everything I want.
And that is the mentality which I fear the Help To Buy Mortgage Guarantee scheme encourages. There is such a thing (although it may sound old-fashioned) that you should work hard and heaven-forbid go without buying stuff to save money for the future. Because the simple fact is you cannot have it all.
This country is in mammoth debt. As at June 2013, the amount of outstanding personal debt stood at £1.425 trillion. People owe nearly as much as the entire country produced during the whole of 2012. And that is freaking scary.
And you know what else is scary?
Every 16 minutes and 26 seconds a property is repossessed.
Which is why I worry about these schemes from the government, because the truth is: it’s not free money. It is a loan. At some point in the future that money needs paying back. And this debt repayment seems to be something which so many people have glossed over.
There seems to be a national obsession with availability of credit to buy homes – but who is actually thinking about how this credit (which is actually debt) will be paid back? Because the one guarantee you can be sure of, is if you don’t make your payments every month the lenders will be coming after your home – regardless of any government scheme.