July 3, 2013
The long-term problems in the housing market are getting an impressive helping hand from the government in the form of the new Help to Buy scheme introduced by Chancellor
in this year's budget. This is good news for prospective buyers who want to get on the housing ladder and also for those who want to move to a larger property. As house prices are also beginning to rise, there is increased optimism about the possibility of selling property at a reasonable price and being able to afford to move up.
What Help to Buy offers
The aim of Help to Buy is to increase the supply of housing and of mortgages requiring a low deposit. The first stage, which came into effect on 1
, allows buyers aiming to purchase a newbuild home to pay a deposit of just five per cent. The government will then lend buyers up to 20 per cent of the value of their new home via an
, so that the mortgage requirement is just 75 per cent. The loan is interest-free for the first five years, and then a fee is charged at 1.75 per cent per annum. This fee will rise annually by the rate of RPI (retail price index) inflation plus one per cent.
The second stage will come into effect on 1
and is a
scheme. This provides incentives to lenders to encourage them to make more mortgages available for people who only have access to a small deposit. Both stages of the scheme can apply to either newbuild or existing property valued at up to £600,000.
Is it working?