New study finds Help to Buy scheme won't help families on modest incomes

Daily Echo: Help to Buy is no help at all Help to Buy is no help at all

The flagship Help to Buy scheme will not help Hampshire families on modest incomes climb onto the property ladder, a study has found.

Eye-watering mortgage repayment costs will continue to put home ownership out of the reach of low and middle-income families, a think-tank warned.

It is calling, instead, for more ‘shared ownership’ with housing associations, which would be “more affordable and much lower-risk” than Help to Buy.

The conclusions will embarrass David Cameron, who has championed the scheme as a way for ordinary people to achieve the dream of home ownership.

The Treasury is underwriting up to £130bn of home loans to persuade lenders to make mortgages available with a deposit of just five per cent of the purchase price.

In Southampton, where a typical terraced home costs £160,000, a buyer would have to find just £8,000 – instead of up to £30,000, as currently demanded.

But think-tank the Resolution Foundation said the problem was the scale of monthly mortgage repayments, not simply finding the required deposit. It found that in a staggering two-thirds of the country they could not be afforded by a couple with one child on a disposable income (after tax) of £22,000.

A mortgage is widely considered to be unaffordable if a household must set aside more than 35 per cent of its post-tax income for the mortgage. In Southampton a couple would need to spend 49 per cent of their available cash – or £900 a month – to repay the home loan. And that proportion would be even higher in most of Hampshire, in Fareham (53 per cent), Eastleigh (54 per cent), Test Valley (54 per cent) and New Forest (63 per cent).

In Winchester a couple with a post-tax income of £22,000 would have to put aside a staggering 73 per cent of it – or £1,337 each month – for the mortgage.

Vidhya Alakeson, the thinktank’s deputy chief executive, said: “The aspiration to own a home remains strong among millions of families.

“But the growing gap between renting and home ownership is too great for many, especially in London, but also in hotspots across the country.”

In contrast the same couple could afford a 25 per cent share of a two-bedroom home across Hampshire – spending 24 per cent of post-tax income in Southampton, for example. Furthermore, the Resolution Foundation’s study is based on property prices at the start of the year – before recent rises, which will have hiked mortgage costs further.

But Mr Cameron has hailed the scheme for “already delivering”, after 2,384 people put in offers in just the first four weeks of Help to Buy.

Earlier this month he said: “Most Help to Buy applicants are first-time buyers, young and have a roughly average household income.”

Comments (22)

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7:51am Sun 8 Dec 13

batesieboy says...

hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!!
hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!! batesieboy

7:55am Sun 8 Dec 13

Micle1974 says...

A friend of mine got a shared ownership mortgage (radian/Swaythling housing association ) mortgage repayment rate through Leeds building society was 7.98% but that was the only option to get on the ladder with a low income
A friend of mine got a shared ownership mortgage (radian/Swaythling housing association ) mortgage repayment rate through Leeds building society was 7.98% but that was the only option to get on the ladder with a low income Micle1974

8:10am Sun 8 Dec 13

skeptik says...

Window dressing with not much in the store - usual political tosh.
Window dressing with not much in the store - usual political tosh. skeptik

11:07am Sun 8 Dec 13

freefinker says...

batesieboy wrote:
hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!!
.. 'literally' - wow.
And where is this other planet?
[quote][p][bold]batesieboy[/bold] wrote: hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!![/p][/quote].. 'literally' - wow. And where is this other planet? freefinker

11:18am Sun 8 Dec 13

Charlie Bucket says...

freefinker wrote:
batesieboy wrote:
hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!!
.. 'literally' - wow.
And where is this other planet?
In fairness, he didn't say "planet" he said "world", and we're already comfortable talking about there being several "worlds" on this planet (first world, second world, third world) so it's not as stupid as it first appears. But probably only by accident.
[quote][p][bold]freefinker[/bold] wrote: [quote][p][bold]batesieboy[/bold] wrote: hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!![/p][/quote].. 'literally' - wow. And where is this other planet?[/p][/quote]In fairness, he didn't say "planet" he said "world", and we're already comfortable talking about there being several "worlds" on this planet (first world, second world, third world) so it's not as stupid as it first appears. But probably only by accident. Charlie Bucket

12:52pm Sun 8 Dec 13

prodnose says...

The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?
The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure? prodnose

2:42pm Sun 8 Dec 13

sass says...

Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices!
Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices! sass

5:34pm Sun 8 Dec 13

Charlie Bucket says...

sass wrote:
Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices!
Then you get run over by a bus, and never really got anything out of life. Tragic.

Somewhere in between saving it all for a rainy day, and "carpe diem" - or YOLO as it seems to be called now - is a sensible middle ground.
[quote][p][bold]sass[/bold] wrote: Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices![/p][/quote]Then you get run over by a bus, and never really got anything out of life. Tragic. Somewhere in between saving it all for a rainy day, and "carpe diem" - or YOLO as it seems to be called now - is a sensible middle ground. Charlie Bucket

5:35pm Sun 8 Dec 13

Charlie Bucket says...

prodnose wrote:
The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?
Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.
[quote][p][bold]prodnose[/bold] wrote: The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?[/p][/quote]Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money. Charlie Bucket

5:38pm Sun 8 Dec 13

Charlie Bucket says...

Charlie Bucket wrote:
prodnose wrote:
The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?
Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.
Additionally, people talk about rent being "dead money" but they forget that the interest you pay on a mortgage is also "dead money", and that's an enormous amount. Owning your home isn't the be-all-and-end-all of life, it can be a millstone around your neck too.
[quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]prodnose[/bold] wrote: The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?[/p][/quote]Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.[/p][/quote]Additionally, people talk about rent being "dead money" but they forget that the interest you pay on a mortgage is also "dead money", and that's an enormous amount. Owning your home isn't the be-all-and-end-all of life, it can be a millstone around your neck too. Charlie Bucket

6:49pm Sun 8 Dec 13

Tony S says...

Solution no 1. Bring back mortgage interest tax relief
Where did they get this 35% figure of affordabillity?
I had a mortgage way back in the 1980's which was 50% of my income which then increased to 80% of my income.
Solution no 2
They need to go through a few tough years, knuckle down, miss a few spa breaks and holidays.

I don't think buying 25% of a home is a solution. It's hard to resell 25% of a home
Solution no 1. Bring back mortgage interest tax relief Where did they get this 35% figure of affordabillity? I had a mortgage way back in the 1980's which was 50% of my income which then increased to 80% of my income. Solution no 2 They need to go through a few tough years, knuckle down, miss a few spa breaks and holidays. I don't think buying 25% of a home is a solution. It's hard to resell 25% of a home Tony S

6:51pm Sun 8 Dec 13

Dai Rear says...

With inflation eating 10% of your mortgage in 3 years interest only is the best bet, especially as there 's no end in sight for zero interest for savers. The corollary of that of course is that a lot of folk like me have had to come out of zero interest in the bank and go buy to let which pushes up prices. Quantitative Easing has never been tried before and heaven knows what's going to happen.
With inflation eating 10% of your mortgage in 3 years interest only is the best bet, especially as there 's no end in sight for zero interest for savers. The corollary of that of course is that a lot of folk like me have had to come out of zero interest in the bank and go buy to let which pushes up prices. Quantitative Easing has never been tried before and heaven knows what's going to happen. Dai Rear

7:32pm Sun 8 Dec 13

Charlie Bucket says...

Dai Rear wrote:
With inflation eating 10% of your mortgage in 3 years interest only is the best bet, especially as there 's no end in sight for zero interest for savers. The corollary of that of course is that a lot of folk like me have had to come out of zero interest in the bank and go buy to let which pushes up prices. Quantitative Easing has never been tried before and heaven knows what's going to happen.
Is that first figure correct? Have you got a source for it? I had no idea.
[quote][p][bold]Dai Rear[/bold] wrote: With inflation eating 10% of your mortgage in 3 years interest only is the best bet, especially as there 's no end in sight for zero interest for savers. The corollary of that of course is that a lot of folk like me have had to come out of zero interest in the bank and go buy to let which pushes up prices. Quantitative Easing has never been tried before and heaven knows what's going to happen.[/p][/quote]Is that first figure correct? Have you got a source for it? I had no idea. Charlie Bucket

9:46pm Sun 8 Dec 13

sass says...

Charlie Bucket wrote:
sass wrote: Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices!
Then you get run over by a bus, and never really got anything out of life. Tragic. Somewhere in between saving it all for a rainy day, and "carpe diem" - or YOLO as it seems to be called now - is a sensible middle ground.
You only get back what you put in. Goof around in school and you have to work a mac-Job for peanuts.
[quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]sass[/bold] wrote: Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices![/p][/quote]Then you get run over by a bus, and never really got anything out of life. Tragic. Somewhere in between saving it all for a rainy day, and "carpe diem" - or YOLO as it seems to be called now - is a sensible middle ground.[/p][/quote]You only get back what you put in. Goof around in school and you have to work a mac-Job for peanuts. sass

3:40am Mon 9 Dec 13

Someone_New says...

Charlie Bucket wrote:
Charlie Bucket wrote:
prodnose wrote:
The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?
Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.
Additionally, people talk about rent being "dead money" but they forget that the interest you pay on a mortgage is also "dead money", and that's an enormous amount. Owning your home isn't the be-all-and-end-all of life, it can be a millstone around your neck too.
There's pros and cons of course, but one reason house prices are so high in this country is that the populace in general has a stigma against renting and also people have traditionally preferred houses instead of flats.
[quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]prodnose[/bold] wrote: The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?[/p][/quote]Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.[/p][/quote]Additionally, people talk about rent being "dead money" but they forget that the interest you pay on a mortgage is also "dead money", and that's an enormous amount. Owning your home isn't the be-all-and-end-all of life, it can be a millstone around your neck too.[/p][/quote]There's pros and cons of course, but one reason house prices are so high in this country is that the populace in general has a stigma against renting and also people have traditionally preferred houses instead of flats. Someone_New

3:42am Mon 9 Dec 13

Someone_New says...

freefinker wrote:
batesieboy wrote:
hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!!
.. 'literally' - wow.
And where is this other planet?
... Yours, Mr Pedantic of Tunbridge Wells ;-)
[quote][p][bold]freefinker[/bold] wrote: [quote][p][bold]batesieboy[/bold] wrote: hahaha all these daft politicians and their friends are so totally out of touch with reality...they literally live in a different world to the average people!![/p][/quote].. 'literally' - wow. And where is this other planet?[/p][/quote]... Yours, Mr Pedantic of Tunbridge Wells ;-) Someone_New

6:45am Mon 9 Dec 13

skeptik says...

Outlooks change - recently we listened to younger relatives chuntering on about how difficult it was to buy. Never was easy, on army salary and my new wife teaching we struggled to buy and pay the mortgage - it is not how much you pay but how much of your income you spend. Listening to the young folk left us speechless, a wedding and honeymoon of some 14 grand and they bemoan their lot! Keeping up with the Jones's who you are never going to live next door too.
Outlooks change - recently we listened to younger relatives chuntering on about how difficult it was to buy. Never was easy, on army salary and my new wife teaching we struggled to buy and pay the mortgage - it is not how much you pay but how much of your income you spend. Listening to the young folk left us speechless, a wedding and honeymoon of some 14 grand and they bemoan their lot! Keeping up with the Jones's who you are never going to live next door too. skeptik

7:59am Mon 9 Dec 13

Charlie Bucket says...

sass wrote:
Charlie Bucket wrote:
sass wrote: Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices!
Then you get run over by a bus, and never really got anything out of life. Tragic. Somewhere in between saving it all for a rainy day, and "carpe diem" - or YOLO as it seems to be called now - is a sensible middle ground.
You only get back what you put in. Goof around in school and you have to work a mac-Job for peanuts.
This is provably not true. Wishful thinking. Plenty of people goof off in school and go on to do very well. Conversely, plenty of people work very hard at school and end up in rubbish jobs.

Also, your use of the phrase "mac job" is part of the problem with the current generation - you ridicule low-paying, menial jobs as if they're worthless, then wonder why people prefer to be on the dole than do them?
[quote][p][bold]sass[/bold] wrote: [quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]sass[/bold] wrote: Scrimp and scrape now, no mobile phone, no nights out, and live rent free later in life. It is all about choices![/p][/quote]Then you get run over by a bus, and never really got anything out of life. Tragic. Somewhere in between saving it all for a rainy day, and "carpe diem" - or YOLO as it seems to be called now - is a sensible middle ground.[/p][/quote]You only get back what you put in. Goof around in school and you have to work a mac-Job for peanuts.[/p][/quote]This is provably not true. Wishful thinking. Plenty of people goof off in school and go on to do very well. Conversely, plenty of people work very hard at school and end up in rubbish jobs. Also, your use of the phrase "mac job" is part of the problem with the current generation - you ridicule low-paying, menial jobs as if they're worthless, then wonder why people prefer to be on the dole than do them? Charlie Bucket

8:01am Mon 9 Dec 13

Charlie Bucket says...

Someone_New wrote:
Charlie Bucket wrote:
Charlie Bucket wrote:
prodnose wrote:
The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?
Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.
Additionally, people talk about rent being "dead money" but they forget that the interest you pay on a mortgage is also "dead money", and that's an enormous amount. Owning your home isn't the be-all-and-end-all of life, it can be a millstone around your neck too.
There's pros and cons of course, but one reason house prices are so high in this country is that the populace in general has a stigma against renting and also people have traditionally preferred houses instead of flats.
Exactly. Also, the idea that a house is an investment, rather than a place to live, hasn't helped. The margin between the cost of building a house, and buying a house, is phenomenal.
[quote][p][bold]Someone_New[/bold] wrote: [quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]Charlie Bucket[/bold] wrote: [quote][p][bold]prodnose[/bold] wrote: The alternative is to rent at, in London, over £1000 a month which is also unaffordable. Better to buy and at least own an asset-- and enjoy some security of tenure?[/p][/quote]Rent in Southampton is often over £1000 now. In London, you won't get a studio flat in a terrible area for that money.[/p][/quote]Additionally, people talk about rent being "dead money" but they forget that the interest you pay on a mortgage is also "dead money", and that's an enormous amount. Owning your home isn't the be-all-and-end-all of life, it can be a millstone around your neck too.[/p][/quote]There's pros and cons of course, but one reason house prices are so high in this country is that the populace in general has a stigma against renting and also people have traditionally preferred houses instead of flats.[/p][/quote]Exactly. Also, the idea that a house is an investment, rather than a place to live, hasn't helped. The margin between the cost of building a house, and buying a house, is phenomenal. Charlie Bucket

8:17am Mon 9 Dec 13

Dai Rear says...

Yes Charlie Bucket.3% compound interest over 3 years=10% loss of value of money. A quick calculation tells me that had the bungalow my parents sold in 1963 for £3,500 been a Mars Bar instead, it would now cost just short of £100,000, rather than just short of £400,000
Yes Charlie Bucket.3% compound interest over 3 years=10% loss of value of money. A quick calculation tells me that had the bungalow my parents sold in 1963 for £3,500 been a Mars Bar instead, it would now cost just short of £100,000, rather than just short of £400,000 Dai Rear

10:21am Mon 9 Dec 13

good-gosh says...

Buying a house is cheaper than renting. A rented house is commonly being bought on mortgage by the landlord - so the rent has to pay for a mortgage anyway. On top of that, the landlord will charge for maintenance and will add a nice fat profit to pay for his lifestyle.
Buying a house is cheaper than renting. A rented house is commonly being bought on mortgage by the landlord - so the rent has to pay for a mortgage anyway. On top of that, the landlord will charge for maintenance and will add a nice fat profit to pay for his lifestyle. good-gosh

11:06am Mon 9 Dec 13

Charlie Bucket says...

Dai Rear wrote:
Yes Charlie Bucket.3% compound interest over 3 years=10% loss of value of money. A quick calculation tells me that had the bungalow my parents sold in 1963 for £3,500 been a Mars Bar instead, it would now cost just short of £100,000, rather than just short of £400,000
What does the interest calculation have to do with inflation though?
[quote][p][bold]Dai Rear[/bold] wrote: Yes Charlie Bucket.3% compound interest over 3 years=10% loss of value of money. A quick calculation tells me that had the bungalow my parents sold in 1963 for £3,500 been a Mars Bar instead, it would now cost just short of £100,000, rather than just short of £400,000[/p][/quote]What does the interest calculation have to do with inflation though? Charlie Bucket

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