In yesterday's budget an announcement was made that a new scheme was being launched to help first-time buyers buy a new home. Apparently those qualifying (?) will be eligible for a loan worth up to 20% of the value of the new property, this will be jointly funded by the Government and house builders. The scheme is for households with a total income of less than £60,000 who can put down a 5% deposit. The extra "loaned deposit" will have to be paid back when the property is sold and will accrue interest in the meantime, admittedly at a reduced rate for the first 5 years.
Well, call me cynical but I think this is the biggest load of rubbish I've seen since the last dustmen's strike.
Here's why -
- The Government is encouraging buyers to buy a house with just 5% of their own money - isn't this where it all went wrong before?
- Independent economists are predicting a 10% fall in house prices this year - so within 12 months these poor people could be in negative equity! Genius!!!
- The property purchased is likely to be around the £160,000 mark so an £8,000 deposit will have to be found by the buyer and then the new scheme will lumber them with another £32,000 on top of their mortgage. What do you mean you can't afford to eat?
- Nobody is predicting fantastic house price rises over the next few years but the poor blighters on this scheme will have to hope the rise in house prices is around 4%pa over the next 5 years just to get them out of negative equity!
- We all know that new properties are sold at a premium, how else can they pay for the fitted carpets and new kitchens etc. so why don't builders just reduce their prices if they need to shift stock.
- Correct me if I'm wrong but don't we have a huge debt crisis in the UK ? So now the Government plans to lend some more money, that we haven't got, to people with little deposit, to buy an overpriced property that will only go down in price.....You just couldn't dream it up!!
I am sure this initiative will wither on the vine like all property based Government schemes have done before, mainly due to stringent qualifying criteria and complex administration. In the meantime let's all just wait until property becomes affordable again and banks start lending again like there's no tomorrow and the circle will be complete.