One look in the window of an estate agency’s window will reveal what many people already know – buying a house can be expensive. People on modest incomes can only dream of scraping together enough money for a deposit, which given that the typical house in the UK can cost over £200,000, could mean having to pay up to 20% of the asking price up front.
This scenario is something that just about every first-time buyer had to go through, but could a scheme launched by the government earlier this year put an end to that? Help to Buy, a scheme aimed mainly at first-time buyers, could provide salvation for many people who would otherwise not have enough money to buy a home, and since its launch in April, it has had some success.
Deposit delight?
Help to Buy is meant to help first-time buyers, but it could also provide a welcome boost to both the housing market and the construction industry, as the scheme mainly covers new-build properties. The scheme is divided into two strands, which are:
Equity Loan
After paying a 5% deposit on the value of a new home worth less than £600,000, a loan making up 20% of the property’s value will be given out by the government. Repayments are interest free for the first five years, which is part of the loan’s appeal. This part of Help to Buy is for first-time buyers only.
Mortgage Guarantee
Not due to come into place until January 2014, this will see £12bn of government funds guarantee part of the mortgages for buyers of new homes worth under £600,000. The eligibility criteria for the Mortgage Guarantee is a little broader, as existing homes count too, while any homebuyer could stand to benefit.
Both parts of Help to Buy are for anyone who is on a modest income who wants to buy a home. However, they should have a good credit rating and prove that they will be able to keep up mortgage repayments.
A new lending boom?
At the time of the scheme’s launch, some high street lenders revealed that they have given significant amounts of money to people for mortgages. One notable example is that of YBS.co.uk, who lent more than £900m for the first half of 2013.
Revealing how they had performed, Chief Executive Chris Pilling said this:
“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.
Net lending has been solid so far this year and we strongly expect this will increase further in the second half of 2013.”
