Embracing Help to Buy

Oyster Team
Published on December 12, 2016

Embracing Help to Buy

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The economic downturn of recent years was widely blamed on irresponsible lending by the banks. Whilst this did not apparently result in a huge numbers of repossessions, it did highlight banks’ exposure to high-risk debt and The City clamped down in order to protect its best interests. This resulted in lenders deciding to limit future mortgage loans to around 80% of the purchase price. All of a sudden, buyers had to find a minimum 20% deposit, causing the market to stagnate.

Indeed, some 40% of non-homeowners say they cannot afford the deposit required to buy (source FSCS).

In order to stimulate a “recovery”, as well as the building of sorely needed new homes, the Government introduced a Help to Buy Equity Loan for first time buyers and a New Build scheme. But these were rather limiting and did little to provide the stimulus required to prompt significant activity in the housing market.

A healthy housing market is so important to the wider economy that the Government has now extended Help to Buy to everyone. In essence the government will act as a guarantor for 15% of the value of a property purchase up to £600,000 (as long as you do not own any other properties), meaning that most people will now be able to secure a loan with just 5% deposit, subject to other lending criteria such as earnings and credit-worthiness. There is no complicated application paperwork required – that’s all taken care of by the lender.

During these times of continuing low interest rates and property values already rising steadily, this could turn out to be the last chance for those who thought they might never have been able to get a foot on the rung of the property ladder.  So 2014 might just turn out to be one of those pivotal moments for the British property market after all!

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Embracing Help to Buy
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