‘When advisers suggest easy sell of free money to get lower rate, Help to Buy seems like a no-brainer’ – Star Letters 31/05/2019

‘When advisers suggest easy sell of free money to get lower rate, Help to Buy seems like a no-brainer’ – Star Letters 31/05/2019

 

This week’s top comment came from Andy Wilson, with his response to the article: First-time buyers should never be offered execution-only – Mojo Mortgages.

He said: “Very few first-time buyers can see much beyond the here and now. Almost none have lived through periods of high interest rates or been exposed to the effects of financial crashes or recessions, and so are not tooled up to understand what can go wrong financially and the effects that significant financial changes could have on them, and for example whether longer term fixed rates might insulate them to a degree.

“I often ask clients, and particularly first time buyers, to think back five years to what their situation was like then, and could they have seen themselves where they are now, five years later?

“Many now have completely different jobs, partners and even children, and many could not have predicted where life would take them. I then contrast that with whether they can accurately predict what will happen to them over the next five years. Unsurprisingly, not many can even try.”

Another contribution comes from Dougie, with his response to the article: Brokers urged not to ignore Help to Buy alternatives – analysis.

He said that it is a bit late to warn about Help to Buy (HTB) now.

He added: “Like Stuart Powell, I saw the problems of Help to Buy right at the start and have always discussed the alternatives as a result. Only one client has ever insisted on the HTB while all others decided on an alternative approach.

“Greg Cunnington may be pointing out that 90% of HTB went through a broker but I would expect that a further check would show that most of them were arranged by tied advisers linked to the builder. For the uninformed client, the HTB scheme seemed like free money.

“When the developer says you have to use their adviser and possibly suggests a ‘non-existent in reality’ incentive to do so and that adviser then suggests an easy sell of free money to get a lower rate mortgage, HTB seems like a no-brainer.

“I have just rearranged my friends son’s HTB mortgage to repay the loan. It has cost him £4,800 more over five years than if he had taken a 95% mortgage. I am now having to remortgage another client with a HTB arranged elsewhere and as they became used to the lower costs they now feel they will struggle with a higher loan or paying interest on the HTB. The HTB arrangement allowed this couple with no children to be able to afford a four bedroom detached house which has increased in price and is now outside their affordability.

“At least the builders advisers and especially the builders themselves did well out of HTB. Funny how new house prices seemed to go up by 10% in our area as soon as HTB was announced.”