By the end of January 2014 there had been 17,395 property sales completed through the Help to Buy Scheme since its launch in April 2013. 82% of the equity loans went to first-time buyers and 85% to buyers outside of London and the South East.
The scheme had mixed reactions in the beginning and concerns it would create a housing bubble but as I mentioned in last weeks blog figures show that mortgage lending activity still remains lower than the previous record. The Help to Buy was designed to allow first-time buyers to get on the property ladder resulting in movement along the chain which is exactly what the market needed.
It has been released that Santander and NatWest are the first lenders to increase the interest rates on their Help to Buy mortgages, the increases ranging from 0.1% to 0.4%. Vince Cable, the Business Secretary has stated that interest rates should be raised to avoid a situation where house prices are out of control.
If you are unsure how the Help to Buy Scheme works here is an outline for you.
- It helps you to get onto the property ladder or move up it, to purchase new builds or existing homes up to the value of £600,000
- You will need to contribute at least 5% of the property price for the deposit.
- The Government will give you a loan for up to 20% of the price, the loan is interest free for the first 5 years.
- You will need a mortgage of up to 75% to cover the rest of the property price.
- Following the purchase you can choose at any time to make voluntary part repayments of the equity loan. The minimum voluntary repayment is 10% of the market value at the time of repayment.
Who can't utilise the Help to Buy Scheme?
- The property purchase must be your only residence. Help to Buy is not available to assist buy-to-let investors or those who will own any property other than their Help to Buy property after completing their purchase.
- You cannot rent out your existing home and buy a second homes through Help to Buy.
What happens when you decide to sell?
- The equity loan is re-payed upon completion of the property sale unless you have already chosen to repay the Agency's equity loan prior to selling.
- If you sell your property for more than the prevailing market value then the amount dye to the Agency under the equity loan will be their percentage value of the actual sale price.
- The Agency will not agree to release its charge over the property for sales less than market value.
The scheme has now been extended until 2020 to continue to make a difference and keep our property market moving.
Beth Alexandra Property Specialists