How much difference has Help to Buy made in 5 years?
As Help to Buy reaches it’s fifth anniversary, we take a look at just how successful it’s been
Back in April 2013, the government launched the Help to Buy equity loan scheme with the aim of helping first-time buyers get on the property ladder.
Up until that point it had become increasingly difficult for people to make the leap from home renter to homebuyer. A mix of stagnant wages, rising house prices and seemingly unbreakable rental cycles left many people unable to save for that all-important deposit.
But Help to Buy changed things, as new figures reveal.
The scheme – which is an interest-free for the first five years equity loan – offers up to 20 per cent of the value of a property outside London, or up to 40 per cent of the value of a property in London. So far, figures suggest that the Help to Buy scheme has done what is originally set out to do and more.
The Ministry of Housing, Communities and Local Government reports that 2017 saw the highest number of first-time buyers in the UK for over a decade, since 2006. The latest Help to Buy figures also reveal the scheme’s ongoing success.
According to the figures published on 28th April 2018, there were 158,883 properties purchased using the Help to Buy equity loan between the launch of the scheme in April 2013 and the end of 2017.
Within this period, first-time buyers continued to make up the vast majority (81 per cent) of purchases using the scheme. The total value of the loans during this time was £8.3 billion, while the total value of the properties purchased under the scheme is £39.3 billion.
The arrival of the scheme’s five-year milestone is particularly important for users of the equity loan, as a spokesperson from the Ministry of Housing explains:
“Under the Help to Buy equity scheme, buyers are required to make interest payments on the loan after five years and this will start from April 2018.”
This means that the very first users of the Help to Buy scheme are now beginning to repay their loans, as of last month. When the Help to Buy equity loan was initially launched, it was only meant to be a three-year scheme, but thanks to its popularity and success, Craig Hall of Legal & General Mortgage Club predicts that Help to Buy will still be present “beyond 2021”.
How does Help to Buy work?
With a Help to Buy loan, the government lends you up to 20 per cent of the cost of your newly built property. This means you will only need to provide a 5 per cent cash deposit alongside a 75 per cent mortgage in order to cover the cost of your new home. You will not be charged any fees on the 20 per cent loan for the first five years of owning your home.
Let’s take a £200,000 home as an example. In this scenario, your 20 per cent Help to Buy equity loan would provide you with £40,000 towards your new home. This means you would only need a 5 per cent cash deposit of £10,000 to access a 75 per cent mortgage of £150,000.
So if you are a first-time buyer, or if you’re looking to move up the property ladder, there’s a good chance you could benefit by taking advantage of the Help to Buy scheme.