There is some recent evidence that the Governments Help to Buy Mortgage Scheme has been working.
Barratt Homes has recently announced a doubling in annual profits soaring to £390.6m in the year to June and become the latest house builder to talk of a return to normality in the market and the company’s chief executive, Mark Clare, said “Following the launch of Help to Buy, sales rates over the summer period last year were exceptionally strong”.
So with all the talk of the scheme working, we thought we would put together a 10 point reminder guide of what the scheme is:
- Why was the scheme set up: The government says that its Help to Buy scheme will assist people trying to get on the housing ladder who can afford mortgage repayments but are struggling to raise a deposit
- When did the scheme commence: The first phase started in April 2013. This saw the government offering a 20% equity loan to buyers of newly-built properties. The Government lends you up to 20% of the property’s value as an equity loan; you’ll need a deposit of at least 5% and you will need to get a mortgage of 75% of the property’s value.
- Is everyone guaranteed a mortgage: Not all mortgage seekers will be able to sign up, and those who do will still have to go through “rigorous” affordability checks by their lender.
- How long is the scheme available for: In March 2014, George Osborne announced that the equity loan scheme in England would be extended to 2020. It had been due to end in December 2016.
- What is Help to Buy2: The second phase of the scheme, originally planned for January 2014, was brought forward, and began in October 2013.Under this system, borrowers can purchase new and used properties and can put down a deposit of as little as 5% of the property price. The lender offers a mortgage covering the other 95%.
- Which Lenders are signed up to the Scheme: The majority of all the major lenders are now lending via the scheme, including ,Woolwich, Nationwide, Santander, Virgin Halifax etc
- What is the basic eligibility: You must have deposit of at least 5%, the house purchase cannot exceed £600,000 and the property must be your main residence.
- What do I have to pay back on the Equity Loan Scheme: The equity loan is free for the first five years. From the sixth year onwards you will pay an admin fee of 1.75% of the loan and it will increase by the RPI plus 1% every year. You will need to repay the equity loan in full after 25 years, when your mortgage term finishes or when you sell your home – whichever happens first.
- Are the interest rates higher for Help to Buy: You will probably pay a higher rate not because of the scheme, but because of the small deposit and taking time to save a bigger deposit and not joining the scheme could be more prudent.
- How do I apply: In the first instance we would recommend you seek Independent Mortgage Advice to discuss your needs