For many of us, buying our own home is one of our key goals in life. But with banks reluctant to lend to buyers who can only save a small deposit, the government is stepping in with the second phase of its ‘Help to Buy’ scheme.
The idea of the scheme is that house buyers struggling to find a large deposit can put down as little as 5% of the price with the lender covering the other 95%. The government then provides a 7 year taxpayer guarantee covering up to 15% of the loan. The hope is that the government backed guarantee will allow access to cheaper loans for those most in need of access to the market. The scheme is open to both first time buyers and those already on the property ladder for purchases of new build and older properties.
Interest in the scheme has been high with RBS (the first lender to offer 95% mortgages in the new phase of the scheme) reporting that it had booked 5,000 mortgage appointments in the first three hours of its launch.
But the plan is not without its critics. Some commentators say that making funds more available will increase demand in a market where new homes are in shortage and so artificially elevate prices. The only real solution to the crisis, they argue, is to build more affordable homes. Some say that the scheme should only help those buying their first home and that the scheme limit of purchases of up to a value of £600,000 is too generous. Others are concerned that the deals the banks are offering in connection with Help to Buy mortgages are not sufficiently competitive and that buyers might be better off saving up a larger deposit before entering the property market.
The only certainty it seems is that the road to that all important first home will remain difficult to tread.
If you require any property advice contact Sara Mounsey on: (direct dial) 01535 613677 or (email) sara.mounsey@awbclaw.co.uk
