95% Mortgages for First Time Buyers – Good or Bad?

95% Mortgages for First Time Buyers – Good or Bad?

I’m really excited about Boris Johnson's announcement whereby, he said that he's going to be helping first-time buyers get on the property ladder by putting down five percent. This basically means that, first time buyers are going to be able to get 95% mortgages.

I think it's actually great but I had a little chat with my brother Russell who's a little bit cynical about it as we were having a bit of an argument and decided to prepare this article on it so that you guys could make up your own mind.

Russel believes that we don't know all the details yet and is very unexcited about this government as a whole.

I do think that the help to buy scheme is a scam which is where the government will loan you the majority of the deposit and you'll just put down five percent on the house.

However, the difference is with the help to buy scheme, they actually help you to buy which is a scheme that's forever ending.

The Government’s scheme is never ending as it's like almost pressure selling people into using it. The number one reason i don't like the help to buy scheme is because you have to live in the house yourself and it’s for the first-time buyers only/

The thing that really kills it is that you can only buy new build houses. I'm excited because when a lot of people start out in property, they struggle raising the funds.

I just think it's a good thing as you could probably rent the rooms out in the house and five percent is so little. If you're talking a 100 or 200 grand house, you're talking five or ten grand to get on the property ladder and it's going to make you more eligible to then get financed on other properties down the line.

Help to buy is a scam and i say it's a scam because it's actually it's for the developers to flog off their new builds like to first-time buyers over-inflated prices and then they're going to drop straight away.

The question you’ve got to ask yourself is that, why is the government announcing this now?

This is a very interesting thing which goes with my prediction that i predicted during the lockdown back in march. I said that, the government is going to try and encourage spending as they're going to try and boost the economy and that's exactly what is happening.

Suddenly, we've got this manufactured mini booming housing that is going to push house prices up again and this is what Boris is going to push. They're bringing this in to boost the economy and to keep spending going in which case, they might make it really good as it might be great again/

But how many times do they promise these schemes but fail to deliver?

I think it sounds great on the face because who wouldn't want to pay a five percent deposit? But then, with this scheme, they said they’re going to slash how much we pay our employees so that you can keep people on however, you only get your employee for a third of the time you pay two-thirds of their full salary and this is like misleading advertising.

Can you imagine if I said that you have to pay two-thirds of my training course but in return, you only get a third of it? That's ridiculous!

I'm very cynical about this scheme generally and my stance is that, don't rely on the government for anything and don't even buy a house to live in necessarily.

What's going to potentially happen is that loads of people are going to get in and buy properties and there will be a dip very soon because right now it's crazy and people are going to buy in the wrong areas and that's why i think that you should use what the government is saying by being smart.

What happened in 2006/2007 is that the banks were lending out 125 grand mortgages to first-time buyers and everyone went crazy and bought loads of houses highly leveraged and then they're in negative equity which is not a problem if it's making you cash flow. But if you're in negative equity and it's a liability because you're living in it yourself, and i can see a repeat of history, then that’s not a good thing.

The government are backing the loans and if these people get a five percent deposit and the housing market drops, then the house isn't worth much and then they can't pay. However, the government told the banks to bail them out right as they're potentially risking up to 44 billion pounds which is quite a big risk if they think the property market is going to drop.

If the property market drops, they're screwed but they're smart enough to know that it's not going to go down and the government wouldn't do this if house prices are going to dip. They're going to be reasonably steady because banks are lending out loans and the interest rates are lowest than they've ever been.

Therefore, this is a big indicator that the housing market is not going to drop massively but might drop a bit and go up once again.

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