Is Help Finally at Hand for First Time Buyers?

Is Help Finally at Hand for First Time Buyers?

Posted by on Oct 11, 2013 in INVESTMENT | 0 comments

After a brief period following the housing boom which ended in 2007, property prices appear to be on the rise once again. The average house price in many parts of the UK is over £200,000 which makes home-ownership something people on modest incomes can only dream of. To try and remedy this, a scheme launched by the government could make buying a home a little less unaffordable.

Help to Buy, launched earlier this year by the coalition government, was designed to try and give both first-time buyers and property developers a much-needed boost. The scheme, part of which has already been rolled out, could be a success, but concerns voiced by the likes of Vince Cable might help to undermine how effective it becomes.

Broadened scope

While initially aimed at first-time buyers, once the second part of Help to Buy is rolled out, eligibility will extend to existing homeowners. The two strands of the scheme are:

Equity Loans

  • After a deposit of 5% is paid for a home, a further loan equating to 20% of a property’s value is loaned out by the government
  • The equity loan is interest-free for the first five years
  • Only homes worth less than £600,000 are eligible
  • This is for first-time buyers only

Mortgage Guarantee

  • Funding of £12bn provided by government to enable easing of lending restrictions by banks and building societies
  • Homes worth under £600,000 are eligible
  • First-time and existing homeowners can take advantage
  • Further details to be announced in due course

The sketchiness over the Mortgage Guarantee may suggest that there is room for improvement with the scheme. For now, fears that the scheme’s potential popularity may help to create a new housing bubble, rendering the scheme a failure.

Lenders more receptive

As a response to the scheme being rolled out, some mainstream high street lenders are starting to lend a little more money in the form of mortgages. About his company’s lending activity, which saw £925m borrowed by customers in the first quarter of 2013, Chris Pilling, Chief Executive of Yorkshire Building Society said:

“Our fundamental aims as a building society – helping people to save for the future and buy their own home – are unwavering and being so closely rooted in our communities makes us ideally placed to achieve them.

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