Help for Home Buyers

It has become increasingly difficult for first time buyers to get on the property ladder.   House prices have risen so much that the average house now costs more than two and a half times what it did in 1995.

Lenders have been very reluctant over the last few years to lend 95% mortgages, although a few of those are now beginning to reappear.   Even so, finding a 5% deposit can stretch the budget of a young person tremendously and take years to save.

Families often join together now to buy houses for the younger generation and this can be achieved in various ways.    Siblings can join together and buy houses between them, or parents may consider downsizing and giving or lending some of the equity in their own homes to their children, representing the deposit.

The Government are aware that in order to kick-start the market, it has to be possible for young people to purchase and  schemes have been established to assist.

In March 2012 the Government launched a mortgage indemnity scheme named NewBuy.  This is available to people moving up the property market as well as first time buyers.

Houses can be purchased with a price of up to £500,000 and participating lenders agree to provide mortgages of between 90 and 95% to buyers meeting the qualifying criteria when purchasing a new build house.  This scheme is operated by several house builders with co-operation of some major lenders and Government backing. This Government involvement protects the lender in the event of repossession occurring.

Further details can be obtained from www.newbuy.org.uk

In the 2013 budget, the government launched a further scheme to assist house buyers.  This will run for three years from January 2014 and is aptly named Help to Buy.   Buyers will take out a mortgage for 75% of the cost of the property, pay a 5% deposit and receive a loan for 20% of the cost of the property from the Government and this loan will be interest free for the first five years.

Many buyers  have faced problems with the housing market in that most lenders’ best mortgage rates are for buyers wanting to borrow no more than 60% of the value of the property.  The Help to Buy scheme will see the Government give lenders who offer mortgages to buyers with a deposit of between 5% and 20% the chance to buy a guarantee on the high loan to value portion of the mortgage.   Again, this Government involvement protects the lender in the event of repossession occurring.

This scheme will also  be available to home movers as well as first time buyers and for established properties as well as new builds.

For more information contact Becky Grimsey on becky_grimsey@blockslegal.co.uk.