In a response to the seemingly perennial frustrations of people hoping to get onto the property ladder for the first time, the government launched a scheme designed to make buying a new home for many ordinary people less expensive. The Help to Buy scheme is expected to help hundreds of thousands of people looking to become homeowners, but how does it work?
Two different choices
In simple terms, Help to Buy intends to help partially finance the purchase of new-build homes. The scheme as a whole is supposed to not only help hard-pressed house-hunters but also provide a boost to the beleaguered construction industry, which has suffered immensely due to falling demand and rising property prices. The scheme comes under two parts, which are:
- An Equity Loan – the government will provide 20% of the total value of a new-build home if a prospective homeowner pays a deposit equivalent to 5% of the property’s asking price. This leaves a mortgage of 75 per cent, which is pretty attractive in the current climate. This started from April 1st 2013 and has been a success so far.
- A Mortgage Guarantee – not due to start for new-build and existing properties until January 2014, this comprises of several billion pounds of funding which will enable people to pay a small 5 per cent deposit on the home of their choice. The Guarantee will include properties worth up to £600,000 and will be available to existing homeowners as well as first-time buyers.
The small print
If looking to take advantage of either scheme, the government has set strict criteria which must be fulfilled. They must have a good credit rating, take out a mortgage with an eligible lender such as a building society or bank and must prove that they have enough funds to pay for the property’s deposit. All of that is applicable for the Equity Loan scheme.
First-time buyers buoyed?
After enduring so much pain and disappointment in recent years, it seems that good news is finally here for first-time buyers. In anticipation of the success of Help to Buy, some high street lenders have increased the amount of money lent to people hoping to buy their first property, with one lending over £900m in the first six months of 2013.
Yorkshire Building Society would probably see lending boosted further in the second half of the year. “We anticipate strong levels of lending across the entire Group in the second half of 2013”, said a spokesperson.
“Accord’s lending through the intermediary channel will continue to play an important part in our growth and help us to fulfil our fundamental purpose as a building society of supporting more people to buy and own their own home.”