Yet more insanity.
www.theguardian.com/money/2013/oct/09/he...e-to-benefit-bankers
Bankers were probably not the people David Cameron had at the forefront of his mind when he spoke about helping those "locked out" of the housing market as he launched the second part of Help to Buy this week.
But it has emerged that City workers could be among the keenest to use the government's scheme to offer taxpayer-backed guarantees on 95% mortgages.
The prime minister said the initiative, which is available on properties costing up to £600,000, would help "people who can afford the monthly mortgage payments but haven't got rich parents and can't pay the deposit up front".
Mortgage brokers and City analysts have suggested it could also be used by borrowers who have enough cash to buy without it, but would prefer not to lock it up in their property. Andrew Montlake, director of London-based mortgage broker Coreco, said he had heard from clients who were reconsidering their options now that 95% home loans were going on sale. "We've had conversations with people who were looking at borrowing 85% or 90% who are now saying that they might actually hold on to the cash," he said. "One of the things that a lot of bankers like is to gear up – they know that rates are still historically low, and cash is important to them."
On a property at the maximum £600,000, using Help to Buy to secure a 95% loan instead of borrowing 90% would cut the deposit from £60,000 to £30,000.
Sandy Chen, banking analyst at Cenkos Securities, said he expected bankers to be some of the most eager to apply for the Help to Buy scheme. "Getting a 95% loan to value mortgage lets you speculate on the expected house price increases a lot more than a 75% mortgage," he said. "Bankers are speculative types and are likely to be highly attracted to the possibility of making lots of money."
James Pargeter, head of residential projects at Deloitte real estate, agreed: "Even in London [£600,000] will get you quite a few options. This allows people to buy a bigger house than they might have done and play house prices more."
However, some claim that even high paid City workers will be using the scheme out of necessity.
Adrian Anderson, director of Mayfair-based mortgage broker Anderson Harris, said he had received calls from young bankers who have "good strong incomes" but little deposit.
News that borrowers who may not need the scheme could be considering using it came as the head of the UK's largest independent estate agency chain suggested banks would need to ration lending to stop demand getting out of control.
Paul Smith, of the estate agents Haart, said the firm had had the busiest start to October for nine years, with 7,281 buyers registering in the first week – a 92% increase on 2012. Smith said there had been "a frenzy of activity" in recent days, with "branches being overwhelmed with buyer inquiries."
He added: "The interest is so great we predict lenders will need to put a cap on the amount they lend under the scheme."
