The Government’s Help to Buy Scheme was launched in 2013 to a chorus of disapproval but it ended on New Years’ Eve 2016 – as was always the plan – with most critics conceding that it had achieved its main aims. But where does it leave first-time buyers now and what options do they have?
It is estimated that Help to Buy assisted nearly 100,000 people get on the property ladder during the three years of its existence. It was criticized by some for inflating house prices, but its principle aim – to encourage banks and building societies to offer more 95% mortgages – was largely achieved, and the property market was boosted as a result.
Help to Buy was essentially a scheme where first-time buyers were provided with assistance in getting on the first rung of the property ladder, by the Government underwriting a portion of 95% loans provided by banks and building societies, but only on properties up to a value of £600,000. The idea was that the Government would take on the risk, in the wake of the 2008 financial crisis, and the property market would see an infiltration of new deals, new build properties and much more movement.
In March 2016 there were 270 mortgage deals on the market which required only a 5% deposit. This was the highest number available since the 2008 crash, and while that number has subsided in recent months, to see 233 current deals, financial commentators view this as a more robust mortgage market and evidence that lenders have more confidence as a result of the Help to Buy scheme.
It was always the intention to end the scheme in December 2016, and the Government’s insistence in doing so, to some extent shows its own confidence in a market now less reliant on the scheme itself. There are now more than 30 lenders offering mortgages worth between 90-95% independently of the scheme, but there are also others options offered by the Government remaining, for those first-time buyers who feel nervous and vulnerable without Help to Buy supporting them.
- Help to Buy ISAs – Launched in 2015 this is a Government-assisted savings scheme to help first-time buyers save deposits, which ends in 2019.
- Equity loans – Here, first-time buyers are offered a 20% loan from the Government towards new-build properties. The 5% deposit and remaining 75% mortgage is for the buyer to fund. This scheme runs until 2021.
- Shared Ownership – First-time buyers, or others struggling on the property lad
der, can purchase a share in a property between 25-75% and pay rent on the remainder.
- Lifetime ISAs – Anyone between the ages of 18-40 can save up to £4000 per annum, and the Government adds a 25% bonus on any savings up to your 50th birthday.
Some lenders offer other options for first-time buyers, which effectively mirror the Help to Buy scheme and further demonstrate their renewed confidence in the mortgage market. Barclays, for example, allow a family member or other nominated guarantor to prop-up a mortgage application and support the buyer with a 10% deposit.
Of course, it is always advisable for first-time buyers to save and provide as high a deposit as possible, even stretching from 5% to 10% can make a huge difference on interest rates and therefore, your monthly premium. But the end of the Help to Buy scheme should not trigger panic amongst young couples or ambitious professionals seeking that first property purchase. The drop in 95% product availability over 2016 in the build-up to the end of the Government’s scheme, does mean less competition and potentially higher interest rates, but most experts don’t expect that to happen and point to the number of available high loan-to-value products outside of the Help to Buy scheme as confidence of that. Furthermore, some Building Societies such as Nationwide have never been in the Help to Buy scheme, and yet they currently offer 95% deals, while organisations such as Santander left the scheme very early, and also remain happy to offer 95% mortgages.
It all adds up to a belief that not too much will change in the wake of the Help to Buy safety net being removed, and even the Brexit vote does not appear to be affecting the mortgage market or lender’s confidence as yet. It’s also worth noting that Help to Buy for new build properties is continuing and you are eligible if you find a new property with a price tag of up to £600,000.
With that in mind, the advice remains the same as always for first-time buyers; work out your financial limitations, shop around and take on plenty of trusted advice. We highly recommend speaking with a mortgage expert to discuss your options and there are some good mortgage advisors in the local area.