Homebuyers in London are to benefit as the government improves Help to Buy and removes restrictions for Shared Ownership scheme.

George Osborne announced in the Autumn Statement to extend the Help to Buy from early 2016 and lift limits for Shared Ownership schemes as well as transform ‘generation rent’ by build 400,000 new homes between now and 2020.

A new London Help to Buy scheme recognises the higher costs of housing in London compared to other parts of the UK and offers a loan of 40% of the property value.

The scheme is available to first time buyers and home movers for new build properties in the capital with only a 5% deposit and a five year interest free loan.

Homebuyers must secure a mortgage to cover 55% of the property value on a new build home in London with a purchase price up to £600,000.

These schemes promote new home ownership for people that are renting and are not available to switching remortgage buyers or buy-to-let investors.

Shared Ownership limits lifted

Homebuyers using Shared Ownership can buy a share of a property rather than the whole house and pay rent of no more than 3% on the balance.

For example, the Office of National Statistics (ONS) shows the average property price paid by a first time buyer is £216,000. With a 40% share and 3% rent on 60% the rent would be £3,888 a year or £324 per month.

They can buy a share from 25% to 75% of a home and use staircasing to purchase the remaining proportion until they own the property outright or with a mortgage.

Currently these properties are allocated to homebuyers in different ways subject to local council criteria. This could mean buyers that work in the local area or are in council housing have priority.

From April 2016 Shared Ownership will have these limits lifted so that anyone with a household income of less than £80,000 outside London and £90,000 inside London can buy using Shared Ownership.

Help with the deposit for a new home can come from family members as the equity release mortgage buyer can access and give to a child or grandchild.

Higher taxes on buy-to-let

The government have increased the stamp duty land tax in England and Wales to 3% for those that buy a second home such as buy-to-let landlords.

Stamp duty for a property up to £125,000 is zero, however, the new tax for a landlord this cost increases to 3% or £3,750.

For a £200,000 residential property the tax on amounts above £125,000 is 2% or £1,500 but for a buy-to-let this increases to £7,500. For a £300,000 property residential stamp duty is £5,000 and for a landlord it is £14,000.

The increase in stamp duty land tax means landlords are likely to increase rents increasing pressure on tenants.

For first time buyers the government are also offering first time buyers under age 40 the Starter Homes scheme. New build homes can be purchased at a price 20% below the market price.

The Starter Homes are available for discounted prices under £250,000 outside London and £450,000 in London.

What are your next steps?

Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even help your children start or expand a business.

Learn more by using the property value tracker chart, mortgage cost calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.

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