Wednesday, March 27, 2013

Would you let George Osborne own 20% of your home? HIs scheme may get you on the ladder - but if house prices go up, so does your debt

A toxic cocktail of the recession and banks’ reluctance to lend has meant the number of houses being bought and sold has plummeted since the boom years.

In November 2007, 100,179 homes were sold. Last year only 61,091 were bought in the same month last year.

House prices have dropped by 7 per cent across England and Wales in five years — and up to 25 per cent in some areas.

SO, WHAT HAS THE GOVERNMENT DONE?

Help to Buy scheme.

There are two parts to this. One offers loans to borrowers who want to buy a new property.

With this, a buyer with a 5 per cent deposit is able to borrow an additional 20 per cent from the Government. In exchange for this loan, the Government gets a 20 per cent stake in the property. This is called shared equity.

With the combined 25 per cent deposit buyers should be able to get a cheaper mortgage from a bank or building society.

Meanwhile, the Government cash is given as an equity loan which is interest-free for the first five years.

After this, a 1.75 per cent annual charge is added. This interest rate increases each year with inflation, plus an additional 1 percentage point.

http://www.dailymail.co.uk/money/mortgageshome/article-2299518/Would-let-George-Osborne-20-home-The-Chancellors-scheme-ladder--house-prices-rise-does-debt.html