It’s making the news rounds in the world of finance, so we wanted to cover it right here for you. Sir Mervyn King has come out against the wildly popular help to buy mortgage scheme. If you’re out of the loop, this is basically a program that gets UK would-be homeowners into homes much faster than without the scheme.
King went on record that the scheme is “too close to comfort” in terms of what happened in the US when the government there tried to guarantee mortgages. The guaranteeing of mortgages that would have otherwise not been granted led to a massive financial meltdown that affected the entire US economy. It is clear that King wants to avoid the problem happening in the UK. Sir Mervyn King is the now former governor of the Bank of England.
But the bigger question here is: Is King really right?
The plan is to have the UK Government guarantee nearly 15% of a mortgage on a property, as long as the property is below 600,000 pounds. Unlike the US program, this is a program that should go for just about three years, from January 2014 to January 2017.
The biggest problem here is the amount for money that homebuyers need before they can even get a mortgage. High deposits keep people out of the marketplace, which slows down the rate of home purchases. This is clearly an economic issue that has a lot of grey area to it.
Our thoughts: we advise everyone to save as much as they can for the purchase of their first home. If you can do that, then you’ll have much more favorable terms from a mortgage lender. Of course, it can be argued that home ownership is a privilege and not a right. It just depends on what you believe. If you believe that everyone should have the right to their own home, then you’ll probably lean in favor of the Government scheme. On the other hand, of you believe that people should be responsible completely for buying their first home, then you’ll want to see this program go away as fast as it’s coming around.
Future Government needs to make sure that they are balancing the needs of both sides of this argument. There’s nothing wrong with really making sure that you’re going to be able to take care of your finances, and there’s also nothing wrong with getting a little assistance. If you know that you’re going to be able to take care of the home once you’ve had the help, then you should definitely purse current Government schemes and see what happens. On the other hand, home ownership isn’t for everyone. You have to remember that you’re going to be responsible for all for the charges. Good luck!