Help to Buy

Help to Buy scheme helps with more than 150,000 property purchases

June 21st, 2018 . Posted in Help to Buy |

According to recent figures by the end of 2017 the government’s Help to Buy scheme has helped with more than 150,000 property purchases.

Headlines
  • £8.27 Billion of Help to Buy Loans
  • 81% of Help to Buy purchases are for first-time buyers
  • The average property purchase price through Help to Buy was £247,230, with the mean equity loan at £52,026
  • Many properties purchased in London made use of the higher 40% equity loan threshold.
Analysis

The new figures demonstrate the success of the Help to Buy scheme, and there are already calls to extend the scheme beyond the budgeted 2021 date, currently in place by the government. Figures suggest that many house builders are heavily reliant on sales because of the success of the shared equity scheme, and an extension of the Help to Buy scheme would keep the new build sector buoyant.

The increase in equity loan in London from 20% to 40% is 2016 has helped open the Help to Buy scheme to numerous more buyers. London saw the biggest number of new builds completed in 2017, at 8,522, compared with 1,978 in Merseyside, the area that saw the next largest number of new build properties completed.

Commentary

Hiten Ganatra, Managing Director at Visionary Finance said: “Demand for new build properties continues to be strong and government strategy should continue to support first time buyers and the property and house building sector.”

“New build properties offer many benefits, including the convenience of a fairly swift transaction, the luxury of zero initial maintenance and house builders will offer deals and incentives to help make a sale.”

Summary

Help to Buy has been a strong government initiative, helping to make it easier for first-time buyers to get on to the property ladder and has made it easier for house-builders to transact on new build properties. It remains to be seen whether the government will continue the programme in its current form, revamp the programme or introduce a new scheme beyond 2021.


The 95% mortgage conundrum

November 6th, 2017 . Tags: ,
Posted in Help to Buy |

In 2013, Help-to-Buy was released in a flurry of excitement – first-time buyers could get onto the property market with a 5% deposit and lenders were cushioned in the event of the homeowner defaulting on a mortgage.

The Help-to-Buy 95% mortgage loan-to-value guarantee scheme saw 20% of the mortgage amount underwritten by the government to encourage lenders back to the marketplace (after the FCA set strict lending criteria) by limiting their potential losses. While the later Help-to-Buy equity loan saw the government lend up to 20% of the cost of a new build home (up to 40% in all London boroughs since 1 February 2016), provided the buyer could find 5% cash deposit and a 75% mortgage – however, after five years, interest was due on the government loan and the government due its share of the equity growth or loss on its sale. The situation as it stands currently is that the mortgage guarantee scheme was discontinued in December 2016 while the equity loan scheme will continue until 2021, as confirmed by then Chancellor, George Osborne in November 2015.

This month, October 2017, Theresa May said the government will find an extra £10bn for the Help to Buy scheme to let another 135,000 people get on the property ladder. Details of this funding are due to be announced in November’s Budget.

This additional support raises some interesting questions. Why has only the Help-to-Buy equity loan continued? And why can’t the principle of an underwritten mortgage scheme be used to help first-time buyers who would like to buy a period property rather than a new build?

After all, what is the difference between a Help-to-Buy mortgage and a 95% loan-to-value (LTV) mortgage anyway? For many lenders, this is the most interesting question. Help-to-Buy was essentially a 95% mortgage that the government guaranteed (in part) that encouraged lenders to offer higher LTV ratios than they had previously. The mortgage for first-time buyers of new builds gave the property market a much needed boost.

To answer why one element of the Help-to-Buy scheme is continuing when the other hasn’t, it’s worth considering the house builders themselves. Currently 60% of new properties are built by ten companies; it stands to reason that those ten companies just can’t keep pace with demand. With the mortgage guarantee element scrapped but a continuation of the equity loan scheme, the government seems to be keen to support the developers who have already invested in future projects to increase the housing stock.

Two important things have happened since the introduction of Help-to-Buy then: one, developers have been supported to increase the much-needed housing stock and two, after seeing the reality of 95% mortgages, lenders are now feeling comfortable enough to increase the scope of the rest of their products. Proof of this is the fact that some have begun to offer mortgage products at high LTV ratios without government support and outside Help-to-Buy’s remit. These low-deposit mortgages are perfect for people who are already homeowners, perhaps young families, looking to take the next step but not able to save the finances to do so thereby helping to keep the market fluid.

Without governmental underwriting however, there are fewer products available in the 95% LTV range. The 95% mortgages are a higher risk for the lender (obviously without the government’s underwriting) and are likely to have higher interest rates. At the time of writing the comparison between the interest rates for Help-to-Buy and 95% mortgages is stark. Help-to-Buy: 1.39% (two-year fixed interest) versus a 90-95% LTV product at 3.89%.

So in much the same way as Help-to-Buy supported first-time buyers to buy a new-build, could the same principle be applied to support first-time-buyers to purchase a period property or a so-called ‘second-hand’ property? Could the government extend its underwriting support to all 95% LTV mortgages? According to Sarah Davidson in This is Money’ from January this year, the leap from 49 Help-to-Buy products in 2013 to 242 in 2017 shows that the Help-to-Buy scheme stopped lenders from seeing first-time buyers as ‘risky’ customers. In fact, since its launch, the scheme has helped more than 200,000 buyers, accounting for one in 12 of all first-time buyer transactions.

If the government could be encouraged to re-enter a mortgage guarantee scheme which included second-hand properties, as opposed to purely new-builds, then surely it would open up the housing market and give an entire swathe of the population some financial flexibility and better life choices, especially in areas of the countries where new-builds are not so prevalent.

If you would like to discuss first-time-buyer mortgages or the Help-to-Buy equity loan options that are available to you and find competitive rates, make contact with the Visionary Finance team today.

 


Help to Buy: what’s on the horizon

September 28th, 2017 . Tags:
Posted in Help to Buy |

Back in 2013, against a backdrop of tentative economic recovery driven by the property market, the government introduced an inspired home buyer’s scheme known as Help to Buy. It would encourage more people to market by giving first-time buyers a helping hand with the deposit or mortgage costs especially when rising prices and stringent affordability tests were locking many buyers out.

Under the Help to Buy Equity Loan, the government lends up to -20% of the purchase price (up to 40% in London) to help buyers to get on the housing ladder, especially helpful for those who are perhaps struggling to save a deposit.

The Help to Buy ISA scheme boosts savings by 25% to help towards a deposit and in addition, the Help to Buy Shared Ownership scheme allows people to buy a portion of their home if they can’t afford mortgage payments on the full amount. They pay rent on the share of the property that they don’t own and can buy greater shares when they are able to.

With so many options, first-time buyers are no longer finding the first rung of the property ladder out of reach and house builders are experiencing a welcome boost in demand.

The good

In fact, figures from the Department for Communities and Local Government show that Help to Buy has been responsible for £17.7bn worth of properties; for between a third and a half of all new-build transactions; for 80% of purchases by first-time buyers; and for 14% of all new residential builds. More than 100,000 people have benefitted from taking out a Help to Buy loan in one form or other.

New builds are particularly attractive under the scheme because only a 5% deposit is needed. Legal and General Mortgage Club noted that between 35-40% of its new build sales were through the scheme. So news that Help to Buy is under review and that’s its future is uncertain has been greeted with concern from all corners.

The bad

For all its success, the scheme has drawn criticism. Some financial experts have commented that the three different elements – the Help to buy Equity Loan, the Help to Buy ISA and the Help to Buy Shared Ownership – make it unnecessarily confusing. Other market watchers have noted that in creating a swathe of first-time buyers, it has boosted demand beyond housing stock capacity and driven up house prices further.

Liberum analysts commented that many people are using the scheme “do not actually need it” and there is the worry that house builders are setting too much store by the scheme. According to Emma Haslett writing for City A.M., more than 50% of sales at Persimmon are Help to Buy, a figure that is 40% at Taylor Wimpey, Galliford Try and Redrow.

The ugly

Further proof of house builders’ dependence on the scheme came in the form of a drop in share prices when an independent review by the London School of Economics was announced. Shares in Barratt, Taylor Wimpey and Persimmon fell by 5%, Bellway and Crest Nicholson fell 3.5% when it was rumoured that all options for the scheme’s future were being considered.

Once the Department for Communities and Local Government (DCLG) announced that the LSE evaluation was part of a regular review process, house builders recovered their share values. But it shows that Help to Buy has become a vital part of the property market, something that LSE will no doubt take into consideration.

Despite the initial panic, there is little likelihood that the scheme will finish before its scheduled 2021 end date. Some possibilities are that the scheme ends abruptly in 2021, or there is a tapering-off up to or after 2021, or the property price cap of £600,000 could simply be lowered and Help to Buy continues. In fact, new housing minister Alok Sharma commented: “We have committed £8.6bn for the scheme to 2021, ensuring it continues to support homebuyers and stimulate housing supply. We also recognise the need to create certainty for prospective homeowners and developers beyond 2021, so will work with the sector to consider the future of the scheme.” Home buyers and builders will await the LSE’s review with great interest.

If you would like advice on how to make the most of Help to Buy over the next four years then make an appointment to speak to the Visionary Finance team.


Help to Buy – Start date announced for 40% Equity Loan in London

February 4th, 2016 . Posted in Help to Buy |

PrintThe new Help to Buy London scheme launched on the 1st of February 2016, as part of a package of measures to help Londoners own their own home over the next five years. Communities Secretary Greg Clark confirmed.

From February 2016, Londoners had access to an improved Help to Buy scheme which has already helped over 130,000 people across the country since 2013.

Under the current scheme loans of up to 20 percent of the properties’ price are made available to first-time buyers and home movers on new build homes worth up to £600,000. In London, the loans will be doubled to up to 40 percent.

Barclays, Leeds Building Society, Lloyds and Nationwide have agreed to offer London Help to Buy loans from next month – enabling Londoners to get on the housing market with smaller mortgages.

Over the past five years, the government has helped more than 270,000 people on or up the housing ladder thanks to the introduction of Government scheme Help to Buy.

Help to Buy London have provided exemplary assistance to first-time homeowners.

Help To Buy London Customer Testimonials

     “It was an excellent smooth service from day one to completion!”

27/10/2016

“Help to Buy team really quick in processing documents, I had to make changes 3 times and the team were so kind and understanding.”

16/02/2017

” Excellent response time from the Help to Buy London team.”

30/03/2017

“Very pleased with the scheme to get me on the property ladder!”

06/06/2017

“From start to finish the process has been very easy with minimal input required from me”

06/09/2017

One year on, and the help to buy house scheme is still going very strong.  To date, over 285,000 homeowners, including 240,000 first-time buyers, have been supported by the government’s Help to Buy schemes.

The Help to Buy: ISA has now helped over 960,000 people save towards their own home, and will assist thousands more into home ownership over the next few years. Source GOV.UK

Visionary Finance has excellent buy to let services that enable you to get onto the property ladder.  Call or e-mail us today to see how we can help you get onboard.