The new Government loan guarantee program for homes in the UK – is this a good thing or a bad thing?
You would initially think that where the Government are offering to guarantee 20% of the purchase price for homes this would be a good thing.
However, if you look at it in the aftermath of the 2008 banking crisis with banks around the world going into melt down and still reeling from the crisis, then it might not be as good an idea as originally thought.
I commend the Government in trying to get the housing market to move by offering Government loan guarantees, but is this going to encourage people into the housing sector that might not ordinarily be able to buy?
The way I understand it is that anyone wishing to utilise the Government loan guarantee, will still need to be able to raise a mortgage, but that this scheme will help people who might already have a 10% deposit and therefore get a mortgage.
Those people who could not get a mortgage and who would have been in the ‘sub-prime’ sector would in theory not be able to borrow under this new Government scheme – or I would hope not! The scheme will come into effect on 1 January 2014, so the housing market will have to wait a few more months before it is stimulated by this scheme – let’s see if it works.
To qualify for a Help To Buy Mortgage Guarantee, your new home must be:
- priced at £600,000 or less.
- your main home, so you can’t use Help To Buy to buy a second home or a buy-to-let property, which makes absolute sense.
- owned fully by you, so you can’t use Help To Buy for shared ownership or shared equity purchases.
To qualify you must be either:
- a UK citizen
- someone with the right to remain indefinitely in the UK
You don’t have to be a first-time buyer and there’s no limit on your level of income. But you can’t use Help To Buy with any other publicly funded mortgage scheme.