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Opinion: The increasing popularity of help to buy

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Opinion: The increasing popularity of help to buy


Published by Anonymous for in Housing and also in Central Government, Finance

For sale sign For sale sign

By Laura Harrison, SEO assistant, Fountain Partnership Ltd 

The Department for Communities and Local Government recently revealed figures showing that the number of completed house sales under the help to buy scheme dramatically increased from 2,133 in November to 3,410 in December last year.

This has meant that the total number of properties in England that have been brought through the scheme now stands at a staggering 14,823, with the total value of loans hitting £600m.

The scheme means buyers can get a maximum equity loan of £120,000 or borrow up to 20% of the value of a home, just so long as they can come up with a 5% deposit. What’s more, the equity loan portion of the scheme offers buyers an interest-free loan for five years on a new build property with a maximum value of £600,000.

There is evidence that there is currently stability in the market and that it is a genuinely good time to buy, which is something the public haven’t seen for some years.

This has also meant that the trends of when people look to buy has changed. For example, Rightmove’s traffic for the first two weeks of 2014 was up by 27% compared to the same period last year.

It seems as though the scheme has become particularly popular with first time buyers (FTBs), who make up 89% of the home purchases.

Having to provide a deposit as small as 5% has meant that buying a home is much more affordable, encouraging people to book their removal companies as soon as possible.

For example, a couple who recently brought one of the new homes in Norfolk, have expressed just how good the scheme is: “The help to buy scheme enabled us to buy the house we really wanted, as well as accessing a better mortgage deal.

“Our advice to anyone in our position is to make that extra effort to save for a deposit and take advantage of the help to buy scheme.”

However, although the market is looking more stable in some areas of the UK, the scheme hasn’t proved to be so beneficial in London, with critics claiming that it is fuelling runaway house prices, and is dangerous because there is not enough supply in the capital. 

The average deposit for FTBs has hit £50,000, while in some areas prices are racing far ahead of wages. It was recently reported that wages would have had to have risen by £44,000 since 1997 to keep pace with house prices in Hackney.

Although there isn’t enough evidence to suggest that there will be a housing bubble in London, if it does become a major concern the government will be forced to modify the help to buy scheme.

For example, there will be a reduction in the cap on property value to £300,000 – half its current value - which will have a significant impact on the London market where the average house price is over £300,000. The government could also restrict the mortgage guarantee scheme to lending on new build properties only.

So, although the help to buy scheme is popular for now with all of the current rules and regulations, it’s unpredictable how long it will be around for before any alterations are made.

Therefore, for those FTBs looking to get on to the property ladder soon, now is a good time when they can take full advantage of the help to buy scheme in its current form.


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