The Help to Buy scheme was originally announced earlier this year in George Osborne’s Budget and has been launched in two parts.
The first phase provided help to buyers of new homes, by giving them access to a shared equity loan of up to 20% of the purchase price, providing they were able to put down at least 5% themselves.
The second phase, originally due to start in January, but now brought forward, will see the Government guaranteeing up to 15% of a mortgage, again when a borrower puts down 5%. This will allow homebuyers to borrow 95% of the value of the property, but crucially will only expose the lender to the risk equivalent to an 80% loan; which, it is hoped, will encourage an increase in mortgage lending. The second phase of the scheme will be available for people wanting to purchase both new and existing homes.
Unlike previous schemes, Help to Buy is available for all and not limited to first time buyers. However, it is however only available for purchases of up to £600,000 and can’t be used to help buy a second home or buy to let investment property. The early introduction of the scheme will mean people can apply from 7th October; however they will not be able to complete their purchase until 1st January 2014.
Announcing the move, Mr Cameron said: “As Prime Minister I am not going to stand by while people’s aspirations to get on the housing ladder are being trashed.”
He continued: “If we don’t do this it will only be people with rich parents to help them who can get on the housing ladder, that is not fair, it is not right.” Source: BBC)
Mortgage lenders offering Help to Buy
The Prime Minister said many mortgage lenders, including Halifax and Lloyds, both of which are partly state owned, have already signed up to the scheme.
However, other large mortgage lenders, such as Barclays, HSBC and Nationwide have yet to decide whether they will take part, seemingly waiting until more details, including the cost of the Government guarantees, is revealed.
A new housing bubble?
With the main surveys, from the Halifax, Nationwide and Land Registry, all showing rises in house prices during 2013, there is mounting concern that Help to Buy, in conjunction with the Funding for Lending scheme, is creating another housing bubble.
Labour has also criticised the Government for not building more homes, arguing that the Government is doing nothing to increase the supply of affordable housing. Shadow Chancellor, Ed Balls, said: “Unless David Cameron acts now to build more affordable homes, as Labour has urged, then soaring prices risk making it even harder for first time buyers to get on the housing ladder.”
He continued: “You can’t deal with the cost of living crisis without building more homes, so it’s no wonder that for millions of families this is no recovery at all.”
Vince Cable, to coalition’s Business Secretary, has also criticised the scheme, previously suggesting it needed to be looked at more carefully before being fully introduced.
However, many housing experts argue that there is no housing bubble and recent price rises have been skewed by a very strong London market, with values in many parts of the UK remain stagnant, or seeing only modest increases.
Do you have a question? Could Help to Buy help you?
Our mortgage adviser, Linda Wood, is here to help you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
For providing mortgage advice we will charge an application fee of £300 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.