Developers who are selling shared-equity homes under the Government’s Help to Buy scheme are advertising them on Rightmove at four-fifths of their real price.
They are slicing off the 20% taxpayer-funded share to make it look, for example, as though a house that is selling for £200,000 has a price tag of £160,000.
Some properties are advertised at two different prices – one at the full price for those not buying through the scheme, and the other with the 20% shaved off for those who are. For instance, Taylor Wimpey has been advertising a property at £439,500 and also separately at £351,600.
The Help to Buy scheme is currently available for first-time and other buyers of new build properties worth up to £600,000 and who have only a 5% deposit.
The scheme gives them an interest-free loan of 20% of the value of the property, meaning that the borrowers effectively have a 75% deposit to put down on a property they could not otherwise afford.
Critics say that slicing off the 20% government loan and making the property look cheaper is misleading. They say it makes the loan look as though it is a gift or a discount, when it is neither.
They point out that after five years, interest is payable on the equity loan, which ultimately has to be paid back anyway.
David Hollingworth, of London andCountry, said: “An equity loan loan is precisely what it says it is. It is a loan which has to be repaid.
“The worry is that this will encourage people to take on debts they do not understand or overstretch themselves and buy bigger properties than they can afford, which is not what the scheme was designed to do at all.”
Rightmove has acknowledged that developers are listing their properties at 20% below the actual price, but says the practice can actually assist buyers.
A spokesman said: “We are aware that some developers are making use of Rightmove to advertise an ‘indicative price’ that takes into account the equity loan offered under Help to Buy.
“We know from previous research that awareness of government schemes among home movers is low and this approach can help raise awareness.”
A spokesperson from Taylor Wimpey said: “We are trying to help customers understand the scheme and the options available.”
Not all lenders are backing Help to Buy, with building societies generally holding off, and HSBC and Santander saying they have no plans to enter the market.
Meanwhile, Help to Buy has come in for criticism from Sir Mervyn King, Governor of the Bank of England.
He said yesterday: “I’m sure there is no place in the long run for a scheme of this kind. This scheme is a little too close for comfort to a general scheme to guarantee mortgages.
“We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis and we need to get back to that.
“We do not want what the United States have, which is a government-guaranteed mortgage market, and they are desperately trying to find a way out of that position.
“So, we must not let this scheme turn into a permanent scheme. When is the right time to terminate it will depend on economic conditions at the time.”
Comments
YES! The moron who didn't understand the comment in the first place has posted it again!
For the benefit of others who weren't around, the thread it came from included a comment from Fun Boy Agent who made a typo, saying 100% 'deposits' instead of loans. Another poster immediately commented that such an idea would be great - no lending (ie, 100% deposits) meant that houses could only be bought by those who saved up the funds and would thus be much cheaper.
Our resident troll then responded, saying it was a stupid idea. In order to help point out the original typo to the troll, who had missed it completely while everyone else spotted it, I came out with the immortal comment:
"100% deposits, not 100% loans. What would happen to UK house prices if it became illegal to buy a property with borrowed money "
The troll has since been in rapture about this - utterly failing to understand that the comment I made was to help him understand another poster's typo that only he had failed to spot.
18 MONTHS ON AND HE STILL DOESN'T GET IT, despite all the best effort of many others to point that out to him. Hilarious.
See it for all it's glory here: http://www.estateagenttoday.co.uk/news_features/First-time-buyers-face-years-of-having-to-save-up
The 1st comment at the bottom, the 5th one, the 8th and the 10th
You really aren't the sharpest tool in the box are you Brian - thanks for making my day and showing your dumb ass stupidity to the world again!
You are quite a troll aren't you, but i will indulge you a little
What is so funny about a hypothetical question?
We have already seen what happens to transaction and price levels when loans become harder to come by.
Added by rantnrave on 2011-12-07 12:30:56
100% deposits, not 100% loans. What would happen to UK house prices if it became illegal to buy a property with borrowed money
Now falling about!
"Do you want to re-post your 100% tax one, still cracking me up."
Go ahead. That was hilarious. You completely misread the whole conversation, loads of posters tried to point that out to you and you spent whole months making a further pratt out of yourself by re-posting it at every opportunity. Comedy gold.
You have provided other moments of entertainment too - when you started attacking Jonnie and thought others were joining in, until you realised it was you they were mocking. The time you started sucking up to Fun Boy Agent was memorable too, demonstrating your inability to keep up with subject matter. Possibly your lowest point?
A few weeks back you were laying into people's spelling, before posting something that was full of mistakes. The irony was picked up by several others.
What else? You had to have capitalism explained to you once, I remember that.
Then there was the time you dropped using the Brian name, pretending to be lots of people, but then forgot and used it again on the same thread. Even then, you started spelling that wrong.
You're actually at your funniest when you're trying not to make a fool of yourself...
even sadder rant but even funnier! Do you want to re-post your 100% tax one, still cracking me up.
Have you watched Life of Brian yet, its all about you me duck!
Remind us which one you were suckered into taking Brian - a liar loan, or a 125% mortgage?
You're very keen to attack anyone who isn't talking up the property market - looks like you're bitter that your property dealings haven't made you a pwoperdee squillionaire and you can't find a greater fool to take your debts on. That's right Brian - you are the Greatest Fool in the UK property ponzi. You followed the herd and made some poor investments, but can't admit the truth. Diddums.
rant, sad but funny, which is sad.
"We had a very healthy mortgage market with competing lenders attracting borrowers..."
Putting aside 125% deals, liars loans and interest only mortgages, of course.
So scandalous doesn't merit comment
Mervyn must really be the complete berk most of us know him to be if he thinks "We had a very healthy mortgage market with competing lenders attracting borrowers before the crisis and we need to get back to that."
Is he barmy - what does he think led us into that crisis?