The government’s Help to Buy scheme is an unmitigated success by helping 170,000 home buyers to realise their dream property.
The Home Builders Federation (HBF) report has found that 170,000 home buyers have benefited from Help to Buy scheme and 81% of these are buying a home for the first time.
Of the total four out of five or 137,700 are first time buyers helped on the property ladder while 32,300 are home movers using Help to Buy to own a bigger home.
Without the Help to Buy scheme it is unlikely the market could support high loan to value mortgages as only 3.3% of new lending has a loan to value (LTV) of 90% or above.
Of the properties bought using Help to Buy including London, 32% are detached, 33% are flats with 21% being semi-detached and only 13% terraced.
How does Help to Buy work?
The Help to Buy equity loan scheme is available to both first time buyers and home movers where the government offers 20% of the property value as an interest free loan on new build properties.
Home buyers only need to find a 5% deposit with 75% provided by a mortgage from a lender for house prices up to £600,000.
If you live in London the loan is 40% of this purchase price where you need a 5% deposit and a mortgage of 55% for the balance.
Over the first five years of the scheme it is estimated the government has invested £8.9bn which could now be worth £9.8bn rising 10.5% or £935 million.
Stewart Baseley, executive chairman of the Home Builders Federation said, Help to Buy has enabled hundreds of thousands of people to realise their dream of owning a home, the vast majority of whom are first time buyers on average incomes.
It has led to an unprecedented increase in house building activity, created tens of thousands of jobs and boosted local economies the length and breadth of the country.
Boost in new build properties
Help to Buy equity loan is only available on new build homes which have seen a boost in demand since 2013 as housing supply has increased 74% and now at similar levels seen the 1950s.
The Help to Buy scheme is not available to switching remortgage buyers or buy-to-let investors as it supports new home ownership to people struggling to get on the property ladder.
The number of new loans on new build homes averaged 6.3% from 2000 to 2012 and with investment from house builders 14.6% of all mortgages in 2017 were new builds.
There may be fewer suitable homes on the market as the equity release buyer can avoid downsizing and agree a lifetime mortgage to access cash from their home to consolidate debt, or even pay for care at home.
As the government lends up to 20% of the deposit for Help to Buy the mortgage is inherently less risky for the lender and the buyer benefits from very attractive rates.
For first time buyers, 62% will contribute a deposit of 5% and for home movers surprisingly two-thirds have a deposit of 10% or less.
Across the country as a whole the average household income during 2018 is £49,000 whereas in London this is £61,400 for first time buyers and £69,500 for home movers.
Income figures for the capital have reduced since February 2016 when 40% equity loans were introduced and this has made the scheme accessible to more households.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
Start with a free mortgage quote or call us and we can take your details. Learn more by using the property value tracker chart, mortgage monthly costs calculator and equity release calculator.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property to consolidate debt or reduce inheritance tax owed by your beneficiaries.
