There is only so much George Osborne could have done to make homeowners feel better.
Did he succeed? Were homeowners the big winners?
With the announcement of the “Help to Buy” scheme, would the problem of buying a home be over?
Would this scheme help make it easier to sell?
Would it make the slightest bit of difference?
Will it help stimulate the economy?
In a nutshell, yes.
You see, the big problem in today’s economy is the big deposits demanded by many mortgage lenders.
This has put homeownership on the backburner for the majority who cannot turn to the bank of Mum and Dad.
It came in two parts
Firstly, it would allow homeowners to put down a 5% deposit on a newly built home. 20% would be funded by a “shared equity” loan which would be repaid when the property was sold.
The loan would be interest free for 5 years, and then revert to a 1.75% annual fee, rising by 1% about the RPI (measure of inflation)
Secondly the new Mortgage Guarantee will support those who have smaller deposits on any type of property.
The Government will give a guarantee to lenders to provide mortgages where the loan to value ratio is high
The end result?
If the borrower has their home repossessed, the Government will cover some of the losses.
Early indications are mortgage lenders are welcoming the opportunity to accept smaller deposits as security for their loans.
Although the scheme is not available for buy to let landlords (..and it will help the country get moving) what can we expect from the aftermath?
House prices being pushed up?
Government intervention inflating a house price bubble?
Making it difficult to buy a reasonable priced home?
Will this be the beginning of the end?
Is now the time to load up on those cheap discounted properties before it’s too late?
You see, a bull market won’t generally end until everyone is on board. And when everyone is on board…
A trickle will form. Then the trickle will become a stream. Eventually, the stream will become a river and finally a flood.
Whether the scheme causes another boom-bust cycle, contrarian property investors will always go against the crowd at key (and highly profitable) turning points.
They will always accept You can make money in any market, while the majority will be sitting scared to death on their hands.
This will always be Your opportunity. The trend will always be Your friend.
Because that’s just the way things are.
Questions, comments and ferocious arguments welcomed! 🙂
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