The government’s Help to Buy scheme has been hailed as the initiative that will finally help struggling buyers get on the first rung of the property ladder.
The scheme offers first-time and other buyers the chance to snap up a property up to the value of £600,000, with a 5% deposit, with the government providing a 20% equity loan which is free of interest for the first five years.
While Help To Buy currently only applies to new build properties, George Osborne has unveiled details of the scheme’s extension, which will take effect from January 2014.
Help to Buy mortgage guarantee
The second part of the Help to Buy mortgage guarantee scheme will rollout to include existing properties, again up to the value of £600,000, with the government stepping in to guarantee loans of up to £12 billion on high loan-to-value (LTV) mortgages.
As the government will be shouldering some of the risk for mortgage lending, this is expected to lead to a resurgence in mortgage availability, with lenders set to offer as much as £130billion in mortgage lending.
Mr Osborne said: “I’m determined to back people who want to do their best for their families. Help to Buy is about getting behind those who aspire to own a home.
“The mortgage guarantee will support an increase in high loan-to-value mortgages for people who can’t afford large deposits, and it will also boost house building. As of today lenders have the detail they need to go away and get ready for next January’s launch.”
Council of Mortgage Lenders: What Help to Buy needs to succeed
While the Council of Mortgage Lenders (CML) has welcomed developments in the Help to Buy scheme, there also argue that a number of measures have to be put in place in order for the scheme to meet with success.
This includes the following:
The Help to Buy mortgage guarantee scheme should be simple for lenders to administer and implement
The three-year scheme should be subject to review from the Financial Policy Committee and have a clear exit strategy
The government should also focus on the supply of new housing in tandem with the scheme
Commenting, CML director general Paul Smee, said: “The mortgage market is open for business, and it is clear that government support has helped to create more favourable market conditions for home-buyers.
“Lenders, whether they choose to participate in the guarantee scheme or stay outside, will continue to do their utmost to meet households’ needs for mortgages, but always in a way that is responsible.”
Wales set to launch own version of Help to Buy
Wales’s minister for housing and regeneration Carl Sargeant, has argued that the Welsh government are seeking to launch Help to Buy Cymru later this year, as part of the government’s attempts to examine a range of options that will “range of options to support buyers who are struggling to secure a mortgage or purchase an affordable family home.”
Wales is also set to launch its version of NewBuy, which offers buyers the chance to buy a new build property with a 5% deposit, on June 3rd. The scheme is already in operation in England, and Scotland and Ireland have their own versions.