Help to Buy will support people who have at least a 5% deposit to buy a home through two schemes aimed at increasing the supply of low-deposit mortgages and new housing.
Each scheme will help to purchase a home with a maximum value of £600,000
The first, the Help to Buy equity loan:
- New build only
- Requires a minimum 5% deposit to qualify
- Expands the existing First Buy scheme and is now available to all, not just first-time buyers
The Government will lend up to 20% of the value of the property through an equity loan, which can be repaid at any time or on the sale of the house, thus only requiring buyers to secure a 75% mortgage from a bank or building society.
The expanded scheme is available from 1 April 2013. It will run for 3 years and provide £3.5billion of additional investment
The second scheme, the Help to Buy mortgage guarantee:
- New build and existing homes
- You’ll need a deposit of as little as 5% for this scheme
- Available to existing homeowners as well as first-time buyers
Buyers need to secure a mortgage for their purchase. The Government guarantee will encourage lenders to offer better access to low-deposit mortgages.
Available from January 2014, this scheme will run for 3 years.
Commenting on the announcement of the Help to Buy scheme in today’s Budget, Jonathan Moore, managing director of EasyRoommate, said:
“The Help to Buy scheme will go some way towards releasing some of would-be buyers from the rental sector but this policy in isolation isn’t enough to solve the housing problem. There is still a huge supply and demand imbalance in the rental market and this needs to be addressed. Boosting house-building is one part of the answer but the Chancellor has missed a golden opportunity to unlock accommodation sat idle across the country. There are approximately 25m empty bedrooms in the UK. If even a fraction of these were opened up to paying tenants it would release some of the pressure building up in the rental sector. The rent a room scheme allows homeowners to earn £4,250 per year tax free from letting out accommodation in their home. But this allowance hasn’t been increased for years. Extending how much homeowners can earn on rent before being taxed will encourage thousands more landlords into the market, and ease the supply shortage renters are currently suffering. Unfortunately, George Osborne has ignored this opportunity and the property market as a whole will suffer for it."
Angel Mas, President – Mortgage Insurance Europe for Genworth, commented:
“Using the Government guarantee for new high loan to value mortgages will expose the UK taxpayer to unnecessary liability - potentially a multi-billion pound loss if there was a late 80s/early 90s style property crash. It is extraordinary that – given the existence of capacity and expertise in the private mortgage insurance sector –the Government has not yet considered the involvement of private mortgage insurance in order to reduce the risk to the UK taxpayer. Given the role of irresponsible lending in the crisis, this seems an oversight that puts the taxpayer at unnecessary risk, whilst leaving the Government in the hands of the banks when it comes to ensuring prudent lending standards are maintained under any extended scheme.
"The mortgage insurance industry has the expertise to help ensure lending remains prudent, and standards do not slip – which is critical for the economic health of the country. We hope the Government avoid crowding out existing private capacity and engages the mortgage insurance sector on risk sharing opportunities as well as to use its expertise to administer such a complex scheme.”
Ian Fletcher, director of policy at the British Property Federation, said:
"This is a strong package of help for housing. Annual transactions are half what they were and that has a knock on consequences for all those parts of the economy that rely on people moving. Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy and both is therefore welcome."
Mark Harris, chief executive of mortgage broker SPF Private Clients, says:
"The Help to Buy initiative should provide a significant boost for the housing market. Effectively, a Government-backed MIG will enable lenders to offer high loan-to-value mortgages while mitigating their risk. We have been calling for an extension of the MIG scheme for some years as something that would make a real difference to first-time buyers, and the fact that the Government is supporting £130bn of mortgages over three years is excellent news. From next year, lenders will be incentivised to make more mortgages available for those with deposits of between 5 and 20 per cent, which should result in cheaper mortgage rates even though the Government has said it won't be involved in the pricing. If lenders are serious about boosting their business levels, this is the perfect way of doing so and it should be of real assistance for first-time buyers in particular.
"The extension of interest-free equity loans to those who are not first-time buyers and on new-build properties worth up to £600,000 will enable many more people to move up the housing ladder. We welcome the news that this will be launched from next month as there really is no time to lose. This is a massive boost to house builders as well, which is good news for the economy. It is perhaps a shame that older homes were not included in the scheme as new-build properties don't appeal to everyone but someone buying an older property can still access the mortgage guarantee.
"Help to Buy will not be available to landlords, which is no surprise. There are enough first-time buyers and second steppers struggling to buy without the money available being snapped up by landlords. It is also not available to those requiring interest only, or those without a minimum deposit of 5 per cent, which is sensible. This is not reckless lending.
"The Budget really will help those who aspire to own their own home. We would welcome an extension of the 'successful' Funding for Lending Scheme, as mentioned by the Chancellor, as it is already making a difference to mortgage availability and pricing. Combined with these proposed measures, overall it was a very positive Budget for home ownership."
Stephen Noakes, Mortgage Director at Lloyds Banking Group, commented:
"We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility.
"Since the launch of the Government's Funding for Lending scheme we have seen mortgage rates hit an all-time low, really making a difference to affordability. These proposals will, just as importantly, address accessibility, and provide a genuine solution to the challenge of raising a deposit. Working together these two schemes will get more people on and moving up the property ladder.
"Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Our recent report from Lloyds TSB indicates that little has improved in the past year for those first time sellers looking to take the second step on the housing ladder, almost two thirds of second steppers had wanted to move up the ladder in 2012 but were unable to. Raising a deposit has been cited as one of the key challenges. Whilst the property market is likely to continue to be challenging, the fresh support announced today will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year."
CML director general Paul Smee says:
"The announcement of Help to Buy which will help mitigate the risk of those lending low deposit mortgages shows a positive re-focus on promoting home ownership. The benefits will not be immediate, and we need to look at the detail of implementation, but this could have a significant impact in the medium term."
Henry Knight Managing Director of mortgage broker Springtide Capital says:
"We are relieved to hear the Chancellor making every effort to help those who have struggled to save for a deposit, as this is always the biggest hurdle for homeowners to overcome. It is also encouraging that this scheme will be available to the majority of the market (capped at £600,000 on new build properties) as there are many young families needing to upscale to properties they could not previously afford. However, Help To Buy is clearly predominantly aimed at first time buyers, which is the area of the market most in need of the help saving for deposits. With this scheme in place, the numbers of people who can move on further up the chain will inevitably increase.Though, the long term effect of this scheme on the housing market overall may take some time to manifest itself.
We are also bound to see the positive impact on the construction industry as the demand for new homes continues to increase."
