Why isn't there a Private Help to Buy

There isn't a week that goes by without mainstream newspapers bemoaning the affordability problem in housing. 

In the UK, where the obsession with owning your home is most acute, the focus is on saving to own, getting a mortgage and finding a home to buy.  

Or, the inability for people to now do those things.  

Aspirations of homeownership are being crushed. 

The UK Government, in its infinite push to satisfy voters, decided to further subsidise homeownership by bulking up people's deposits.  


Well, the spin focuses on the consumer problem where cost of living (especially rent) is so high that people cannot save enough deposit to buy. 

What they don't explicitly say is the scheme, called Help to Buy, is to fund Property Developers.

Yup, that's right: Help to Buy is just for select new build properties.

You know, the ones you don't favourite on Rightmove.  

Worse, these new build homes come with heavy service charges.  

So consumers get more debt, and less cashflow. Way to go UK Government.  

I know of at least three start-ups and two corporates trying to launch a 'Private Help to Buy'.  

IMO all of them will fail.  

Now, don't get me wrong; I want them to come up with better solutions, not the sub-optimal debt/equity mix that they're currently touting (or failing to).  

Beyond banks/lenders not liking the private structure (with Help to Buy the Government underwrites the debt, so banks gladly take the money), the margin AND cashflow is in favour of the lender. 

Yup, anyone trying to do Private Help to Buy, or just top up buyer deposits, is making profit for lenders, and saddling themselves with all the risk.  

The lender will have first charge of the property. 

The start-ups will have minimal cashflow.  

And tiny scale.  

So, I hear you say, what can these intelligent people focus on instead? 

Glad you asked: 

1. Get rid of the debt - exactly what I'm doing with The Unmortgage.  

2. Become a lender - one that innovates away the risks and increases aspiration

3. Partner with others, like housing associations - how Dolphin Living operates

There is a big problem to be solved here. But so far, the ideas aren't making it into reality. 

To end on a positive note: if you are renting and want to own, there's a lot of innovation coming your way this year.  

The mortgage has been a great product; it's the single reason for massive increase of wealth amongst the middle class. 

But when homes cost 9x income and banks will only lend 4x your salary (self employed? Get used to the mortgage lending computer says no), then the mortgage is just not fit for modern purpose. 

Unless you're independently wealthy.  

But typically you rent a home worth 8-12x your income.  

Think about that. You can afford to rent, never missing a rent payment, a home worth 250% of what a bank will lend.

Where there's a will, there's a way to own.  

Disclaimer: much of the above is based on my research for The Unmortgage, which when launched later this year will help you buy a home without a mortgage. 

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