Jamie Lennox - Mortgage Adviser - Dimora Marketing

Could Help to Buy make a come back?

Help to Buy returning

What was Help to Buy?

Help to Buy was a government-backed scheme in the UK  which was launched in 2013 with the aim to help people get onto the property ladder or move up it. The scheme was available to both first-time buyers and an older version also allowed existing homeowners. it offers a range of benefits to help make buying a new home more affordable.

One of the main benefits of the Help to Buy scheme was that it enables buyers to get onto the property ladder with a smaller deposit. Typically, a mortgage lender will require a deposit of around 10% or more, but with Help to Buy, buyers can purchase a home with just a 5% deposit. The government provides a loan of up to 20% of the property’s value (40% in London) which helps to make up the remaining deposit.

The scheme closed to new applications in October 2022. As things stand there has been no adequate replacement to help more people onto the housing ladder like how this scheme did.

Impact of Help to Buy ending?

It was always known the Help to Buy scheme wouldn’t run forever. However, the time of the scheme closing in 2022 couldn’t have come at a worse point. The backlash of Liz Truss’s tenure as PM lead to mortgage rates skyrocketing and uncertainty around the economy saw a slowdown in demand for people wanting to move house.

Many builders and developers have announced they plan to slow the number of homes being built this year due to reduced demand from buyers. With the mounting housing problem in the UK with failure to build enough homes year in and year out this could be alarming for the future.

Construction accounts for a huge proportion of jobs in the UK and any slowdown in building homes could have a nock on effect unemployment. With a general election due in 2024 there have been reports from The Times newspaper that Rishi is considering bringing some form of version of this back prior to the next election.

The benefits and cons of the previous Help to Buy scheme

Benefits:

  1. Affordable deposits: One of the most significant benefits of the Help to Buy scheme is that it enables first-time buyers to get onto the property ladder with just a 5% deposit. Whereas with new build properties, previously many lenders wanted in excess of 15% available as a deposit.
  2. Access to better mortgage rates: Another benefit of the Help to Buy scheme is that it enables buyers to access better mortgage rates. With the government providing a 20% equity loan, lenders are more willing to offer more favourable rates due to having an overall lower loan-to-value mortgage, which can help to reduce monthly payments and make owning a home more affordable.
  3. Reduced initial costs: As the equity loan only cost£1 per month for the first 5 years it offered a cheaper start to life for many homeowners, with interest rates as high as they are at the moment this could be a welcome relief to any wannabe homeowners.

Cons:

  1. Limited availability: While the Help to Buy scheme offers many benefits, it is only available on selected new-build properties. This means that buyers may have limited options when it comes to choosing a home. Additionally, some developers may choose not to participate in the scheme, further limiting the available options.
  2. Repayment requirements: While the government provides a 20% equity loan, this is not a gift but rather a loan that must be repaid after five years or when the property is sold. This means that buyers may face additional financial pressure in the future, as they will need to repay the loan while also paying off their mortgage.
  3. Potential for negative equity: Another potential drawback of the Help to Buy scheme is the potential for negative equity. If property values fall, buyers who have taken out an equity loan may find themselves owing more on their property than it is worth. This can be a significant financial burden and may make it difficult to sell the property if necessary.

Conclusion

In conclusion, the Help to Buy scheme offered many benefits to first-time buyers in Norwich, including affordable deposits and access to better mortgage rates. However, it is important to consider the potential drawbacks, such as limited availability, repayment requirements, and the potential for negative equity. Although nothing formal is laid out on if and when it will return and what version of it will be available. It would still be a welcome return to many first time buyers.

 

 

Share this post with your friends

Subscribe to our Newsletter

The mortgage landscape can feel like it’s changing at a million miles per hour. Subscribe to our news letter to keep up to date with these changes.

Our previous blogs...

£5000 deposit mortgage

The £5000 Deposit Mortgage Revolution: A Beacon of Hope or a Mirage? In a world where the idea of owning a home feels more like a pipe dream for many, the recent announcement by Accord Mortgages is akin to spotting an oasis in a desert for first time buyers. Offering

Read More »
Limited company director mortgages

Limited Company Director Mortgages: The Complete Guide Wondering can I get a mortgage as a Limited Company Director is an often-asked question. With a lot of confusion about what can be used as income towards your potential mortgage.  But fear not, for I’m here to guide you through this labyrinth

Read More »
Mortgage meeting

Top Tips to Prepare for Your Mortgage Meeting Understanding the process of securing a mortgage can be daunting heading into a mortgage meeting, even if this isn’t your first rodeo, as the process can differ depending if you are a first-time buyer/homemover or looking to remortgage to secure a new

Read More »

Want to see how we can help you?
Get in touch below...

You voluntarily choose to provide personal details to us via this website. Personal information will be treated as confidential by us and held in accordance with GDPR May 2018 requirements. You agree that such information may be used to provide you with details of services and products in writing, by email or by telephone. By submitting this information you have given your agreement to receive verbal contact from us to discuss your mortgage requirements. 

The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK.

Dimora Mortgages Ltd (Company Number 13004223). Registered in England & Wales

Registered & Trading Address: 7 Hobart Drive, Little Plumstead, Norfolk, NR13 5FS

Dimora Mortgages Ltd is an appointed representative of PRIMIS Mortgage Network, a trading name of First Complete Limited which is authorised and regulated by the Financial Conduct Authority. (943407) 

Your home may be repossessed if you do not keep up repayments on your mortgage.

For our mortgage advice services, we will charge a fee of between £0 and £450. The exact amount will depend on the type of application we are proceeding with.
However, the exact amount will be confirmed at the earliest possible convenience.

time to book a mortgage appointment?

Click the link below to book in with one of our expert advisers