The Government’s Help to Buy scheme aimed at first-time buyers has been updated, with the changes taking effect in April. The pandemic saw not only a drop in applications but also lenders who were reluctant to lend 95% mortgages to applicants due to fears of job losses and salary cuts. However, state-backed mortgages have now been launched, and it is hoped this will kickstart new applications from those looking to buy their first home.
Deposit
One of the main initiatives for the scheme has been the acceptance by the Government that saving a deposit for a home is the biggest obstacle to owning your own home, but now High Street lenders are willing to offer Help to Buy loans and accept a deposit of just 5%. Experts still believe buyers will get better deals if they can manage to put down 10%, however.
Research has shown that in the 1990s, saving up for a deposit took four years on average. Today, this equates to an unrealistic 21 years.
Stamp Duty Holiday
The Chancellor’s stamp duty holiday, offered as a result of the Covid outbreak, has resulted in an increase in demand for homes. This, in turn, has increased the price, which has had a negative impact on those looking to get their foot on the property ladder. The surge in the property market caused by the stamp duty holiday has resulted in more house sales agreed on one particular day in March than on any other day in the past ten years.
Help to Buy
The Help to Buy loan scheme was first introduced in 2013, and the new changes involve stricter guidelines for builders as well as caps on the cost of the properties eligible for the scheme. It is hoped these changes will help the people who need the scheme most, but potential buyers with low deposits are still losing out, despite many qualifying for a Help to Buy loan.
Critics of the scheme argue that property developers are the only ones benefitting and that all it has done is push up property prices even further, meaning some buyers are now even less likely to be able to afford their own home.
Other critics have complained that the scheme wasn’t exclusively for first-time buyers and that the value of the homes that were eligible was too high. This meant that those who didn’t necessarily need the scheme were benefitting, and it encouraged buyers to stretch themselves financially, potentially spurring them to purchase properties they couldn’t realistically afford. However, it is hoped the recent changes announced by the Government will address these issues. The property market is now waiting to see if it’s enough.
