Industry pundits poured scorn in last week’s issue on a new property investment fund offering first-time buyers the chance to get on to the property ladder with just a 5% deposit and no mortgage.
I do worry about our industry, sometimes. Here’s an idea that could get the housing market moving again, leading to a potential significant increase in volume, at a time our business is in the slumps, and all we can do is ridicule it.
Dev Malle, sales director at Personal Touch Financial Services says it’s not regulated. But these people don’t give loans or mortgages, so they would not need to be covered by the Financial Services Authority.
It is true, as Malle says, that the devil is in the detail, but when was the last time he looked in detail at a mortgage contract?
And what is the risk of buying a house this way? If the fund buys 95%, with no loan or mortgage, there is no risk of any negative equity.
Yes, the value of the 5% can go down, but that will not lead to repossession.
The upside is that someone gets the house they want with minimal risk, only having to pay the charges, which we are told equate to a similar mortgage, and find a 5% deposit. They get the upside on the 5% and time to save for the extra at their leisure.
These guys don’t take our business away from us. They could help kickstart the market. All their customers will become our customers as they do what comes naturally – buy the whole property with a mortgage.
I would have expected a better analysis from Mortgage Strategy.
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