The government has pledged £10 billion for the Help to Buy scheme to fund 135,000 first time buyers to get on the property ladder.
Prime Minister Theresa May has announced a £10 billion extension of the Help to Buy scheme giving a boost to 135,000 homebuyers from now to 2021.
The Help to Buy equity loan scheme has already assisted 130,000 first time buyers and home movers with their house purchase requiring a small 5% deposit.
More details are expected in the November Budget and the initiative is good news for young people as home ownership for 25-year olds has halved in the last 20 years.
Help with the deposit for a new home can come from family members as the equity release buyer can access cash using a lifetime mortgage and gift to a child or grandchild.
Fewer young people own homes
According to the Local Government Association, over the last twenty years the number of 25-year olds that own a house has dropped from 46% to just 20% today.
Since the Help to Buy equity loan was launched in April 2013 there have been 134,558 completed purchases with a value of loans at £6.72 billion to June 2017.
From this total 81% or 108,620 are first time buyers with value of loans at £5,26 billion and the remaining 25,938 are home movers.
The mean purchase price of a property bought under the scheme was £240,530 and the mean equity loan was £49,963.
The median price paid by first time buyers using Help to Buy was £204,950 and in London this increases to a median price of £379,950.
London represented a small proportion with only 6.5% or 8,813 home bought using Help to Buy which is very popular in other regions across England.
Older homeowners have benefitted from the rise in house prices with remortgage buyers releasing capital which they can use to improve their home.
How Help to Buy equity loans work
The Help to Buy equity loan scheme allows borrowers, both first time buyers and home movers, with a 5% deposit to buy a home with a loan from the government of up to 20% of the property value.
Your deposit and the government loan lets you source a mortgage from a lender with 75% loan to value (LTV) available on new build properties only.
The lower the LTV the more competitive is the mortgage deal and the lower is the interest you will pay on the loan.
In London the equity loan is 40% so you with your 5% deposit you only need to secure a mortgage with a LTV of 55% of the property value costing less than £600,000.
This means in England the maximum 20% loan is £120,000 and in Greater London 40% loans can be up to £240,000,
Many lenders would require you to have a LTV of 85% for new build homes so unless you have a sizable deposit or are prepared to wait and save, Help to Buy can assist you to secure your purchase.
With competition from buy-to-let investors and reduced supply of suitable properties, home movers are remaining in their existing home and saving for a bigger deposit.
What are your next steps?
Speak to our LCM mortgage advisers if you are planning to move home, buying your first home, remortgaging your existing home to a new cost effective mortgage deal or are a buy-to-let investor.
For equity release buyers our London City Mortgage brokers can recommend lifetime mortgages allowing you to receive cash from your property to help maintain your standard of living as costs rise or for home improvements and holidays of a lifetime.
Learn more by using the mortgage cost calculators, equity release mortgage calculator and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
Use your dashboard to access online mortgage quotes, money off vouchers and start your mortgage application online 24/7 on desktop, tablet or smartphone.
