This has been on my mind for a while, and I think it is a hot topic for so many. The Government have a number of schemes and incentives (I’m not sure if any of these ended at the end of 2016 however) but I don’t think these schemes help or address the national housing issue. The purpose of these ‘Affordable Housing’ developments, surely, is to provide ‘AFFORDABLE’ housing to the first time buyer, to enable them to get on the property ladder and move us away from a generation of renters, or am I missing the point?
If you look at any of these so called developments in my area, the cheapest is in excess of 250K, for a 2 bed. That might not sound unreasonable, but when you need minimum 10-20% deposit these days to have even the slightest change of a bank being willing to give you the money, you need up to £50 000 in your bank, just to secure the mortgage. This is where the Government schemes are then meant to help, the best one looks to be the Equity Loan Scheme, whereby you provide a 5% deposit and the Government give you a loan of up to 20% of the market value bumping you up to a handy 25% deposit towards to the cost.
Now this sounds great, but trying to find the T&C’s and In’s and Out’s of what is repayable and when other than knowing it has to be paid in full within 25 years or when you sell the property which ever is first and you make no payments within the first 5 years, I’ve not found any. Anyway, you need to still be in the position to obtain a mortgage, this is where I’ve found it gets tricky. Thanks to my wife now working as well, we have two incomes as we are now in a position to get an AIP (Agreement in Principle) of around £196K which isn’t bad, considering when only I was working it was on £43K!
The issue around this is my maths. The type of house that we would need would cost us, in the ball park of £350k. That means, even if we got the Governments Equity Loan, we would still need 5% deposit, that’s £17500, not out of reach, but still a lot of money. Ok so imagine we have this, (that would be lovely wouldn’t it!) the Government would then give us a loan of ‘Up To’ (I need to stress that point, it’s all about filling criteria with them) £70000. Right so we are now at 25% deposit, totalling £87500 meaning a mortgage total of £262500. According to mortgage calculators, a mortgage of that value, over a term of 35years would start off at repayments around £650 a month, depending on the bank and interest deals around at the time of running the calculators.
Have you worked out my issue yet?
We still wouldn’t be able to get the mortgage, as our maximum a bank might give us is £70000 short of the total amount needed after deposit, so unless we want to move to another district/county and find new jobs etc it’s not going to happen.
This is where my frustration really starts to kick in with the current economy and the way things are looked at. I pay currently monthly rent £825 a month. According to mortgage calculators, a mortgage of up to around £300K wouldn’t even cost that much monthly repayments, so why, WHY when I have lived on my own for a number of years, been responsible with money and never missed a single rental payment or bill, am I not able to be considered responsible enough to be able to pay a mortgage back of less value than my current rent, surely I’d be saving money each month so I’d be a in a better position? I get that it’s due to property markets, and if the values fell, and you happened to not repay, the bank COULD loose money, and to some extent this is what happened before, but if you look at the current economy, and the boom in property prices in the UK and forecast, that’s unlikely any time soon, give it a couple of years on a fixed term and 100% LTV mortgage I’m sure you could re-mortgage and the property price increase then provide a suitable deposit against the value the house would then be at.
So as I say, we are, like so many people stuck renting, adding to the statistics of the renting generation, putting money into the pockets of others, rather than build a life of our own, providing a legacy and safety net for our children in the future when we pass.
I’m quite conscious of that last fact, my parents are divorced, both own a house of their own of which us kids will one day inherit, that’s two house total each split value wise in 3. I won’t go into figures but each time it happens, it will be substantial. But the thing is A) I don’t want to think about that, and B) when the day does come, it probably still wouldn’t stretch enough to being a deposit in the future. The issue needs to be addressed, the Government and Housing Associations/Developers building all the ‘Affordable Houses’ need to actually start building as they quote Affordable Houses.
I’ve been giving it some thought, and the issue is there are no property developers that work for charity, and I’m not saying they should, but if the Government helps, incentivise or levies some of their costs etc, much like with incentives to companies to employ apprentices then that might help. The other thought of mine, and this, personally I feel is a good point, is ‘don’t finish the houses’. It sounds daft, but seriously, I would quite happily buy a basic house unfinished with no carpets, no kitchen counters, no fixtures or anything but the bare essentials so electrics, plumbing/heating. I’d be fine with that. That way, it would be cheaper purchase cost, meaning I might stand a chance of being able to buy one. I don’t care if we have a house with no carpet for a couple of years until we’re in a position to buy carpet, or no paint on the walls until we are in the position to afford to decorate, it would be mine, I would have a life time, and a blank canvas to do with as I please when I could and saw fit. Wouldn’t this be ideal? And how much money do you think it would save on each property the companies build? Although they could simply bring down their profit margins too?
Anyway, that’s my view. I know there are lots of views, and hundreds of thousands of people in the same position all very frustrated by the current state of affairs where this particular topic is concerned. I just hope there is light at the end of the tunnel one day, and that something changes.