Help to Buy scheme launches early
At the weekend, the Prime Minister announced that the plan to allow potential home owners to get on the property ladder with just a 5% deposit would be extended to include ALL types of homes and not just new builds.
It is believed that mortgage-lenders, including the Halifax, RBS and Nat West, have already signed up to it. Some of the UK’s other big lenders HSBC, Santander, Nationwide and Barclays are yet to confirm whether they will take part.
Under the first phase of the Help to Buy scheme, launched earlier this year, the government gives homebuyers in England equity loans of up to 20% of the price of a new property worth up to £600,000. Homebuyers need to contribute at least 5% of the property price as a deposit, with a 75% mortgage to cover the rest.
Under this second phase of Help to Buy, the government will underwrite 15% of the value of a mortgage, allowing people to buy properties with a 5% deposit. It will apply to all home purchases in the UK of up to £600,000. Crucial details such as interest rates on the mortgages are not yet known.
Applications for loans can be made from next week but the loans will not be paid out before 1 January. This means it may be possible for buyers to exchange contracts before the New Year, with mortgage offers in place, but completion would have to be in 2014.
There has been speculation from some lenders and Vince Cable, that the result of this second phase of Help to Buy which brings previously owned properties into the scheme, could cause property prices to rise, creating a ‘bubble’, impacting affordability and ultimately destabilising the market.
Alan Williams, Fenn Wright Managing Partner says “Further details of this second stage of Help to Buy are due to be announced this week and we’ll be keeping up to date on developments so we can pass good information on to our homebuyers.
“However, if this initiative, which is due to last for three years, brings first-time buyers back to the market, we could see transaction volumes return to normal levels which has many benefits for the wider economy.”
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