In 2013 the Coalition government led by David Cameron and George Osborne created the Help to Buy schemes. The schemes include Help to Buy: Shared Ownership and Help to Buy: Equity Loan which helps hard-working people like you take steps to buy your own home. The Help to Buy scheme makes it possible to buy a home with just a 5% deposit whilst Help to Buy: Shared Ownership deposits are typically much lower than buying traditionally.
New Build developers in the UK have seen a rise in First-time buyers purchasing homes. Naturally, New Build homes are an attractive option for first-time buyers because of the government Help to Buy schemes available and the convenience of moving into a brand-new property which requires no renovation – something which can be very costly.
The Help to Buy ISA pays first-time buyers a government bonus. For example, save £200 a month and Help to Buy add £50, up to a maximum of £3,000, boosting your ISA savings of £12,000 to £15,000. The Help to Buy equity loan is interest-free for the first 5 years. After this, borrowers are charged a rate of 1.75%, with this rate slowly increasing year-on-year in line with the Retail Price Index (RPI) plus 1%. Interest payments are paid on top of mortgage repayments.
It has been 5 years since the government launched its flagship programme and has supported close to 117,000 first-time buyer purchasers. With 13,500 loans set to mature in 2018 adopters now need to decide how to pay back the government’s loan.
1 in 7 loans to first-time buyers has been to a purchaser across the South East, with average prices have increased by the equivalent of £67,260. With the exception of London, those in the East of England have seen the average value of their property rise the most. Just 8% of loans have been issued to purchasers in London, however, first-time buyer property prices have increased by over one third since 2013.
No doubt industry bodies will watch with interest to see whether adopters re-mortgage, sell up or pay back their loans from another source.
The popular Government-funded Help to Buy Equity Loan is available until 2021. The scheme was extended through a further £8.6 billion in Government funding.