Help-to-Buy Mortgages – What next?

Posted on Tuesday, November 8, 2016

With the government’s help-to-buy mortgage guarantee scheme closing by the end of the year, what other options are there for those who those want to take their first steps onto the property ladder?

The chancellor, Philip Hammond, stated in September 2016 that the scheme had a “specific purpose that has now been successfully achieved”. The purpose, of course, to help buyers into the market without putting up 100% of the deposit themselves. Under the government’s mortgage guarantee scheme, launched in late 2013, the scheme meant buyers only needed to raise 5% of the property value for a deposit, with a government guarantee on a further 15%, giving mortgage lenders the incentive to loan larger amounts. It is only available for first time buyers purchasing a property up to the value of £600,000 within the UK. 

During the last three years, the Help-to-Buy scheme has helped buyers purchase more than 86,000 households, many of them lower-value properties.

The scheme will end, as scheduled, at the end of 2016. Mortgage lenders have called for it to be replaced, fearing that the closure of the scheme could detrimentally affect the first time buyer market.

What next?

There are other schemes available to help first time buyers to purchase properties after the closure of the government initiative.

Five-year, interest-free equity loans are available for new build homes. Through the Equity Loan Scheme, buyers can receive a loan for up to 20% of the property price when they have raised their own 5% for a deposit. This is open to first-time buyers and existing homeowners and only available on new build homes up to the value of £600,000 (if the developer advertises it and if you don’t own any other properties).

If you are not planning to buy a property for several years, the Help to Buy ISA Scheme may be of use. Save up to £200 a month in your ISA, and the government will match £50 for every £200 you save. When you are close to buying your first home, you can instruct your solicitor to apply for the government bonus and it will be added to the money you are putting towards your first home. Find out more about this at www.helptobuy.gov.uk.