First-time buyers have been given a definite boost recently, largely thanks to the second phase of the Government's Help to Buy scheme. In fact, it helped over 7,000 buyers get onto the property ladder in the first six months of its launch, according to figures from HM Treasury, with 80% of those being first-time buyers (FTBs).
In total, 7,313 mortgages were completed with support of the scheme between October 2013 and March 2014. In even better news, the help seems to have gone precisely where it's needed – just 5% of completions using the scheme were on properties in London, which would perhaps suggest that fears of the scheme fuelling price rises in the capital could well be unfounded
The majority of borrowers supported were in the North West and East, and almost half (45%) of properties bought through the scheme were valued at £125,000 or less. Only 31 completions were on properties worth over £500,000, while the average price of a property bought (or remortgaged) through the scheme was £151,597 – compared to the national average of £252,000.
These are promising figures, and show just how much help the scheme has been able to provide in a short space of time. Under this part of the scheme, the mortgage guarantee element, borrowers can get a mortgage with a deposit of as little as 5%, aimed at those buyers who can comfortably make the repayments but who have perhaps found it difficult to save a significant sum for a deposit.
And it seems to have had the desired effect. Not only has it boosted FTB numbers but it's reinvigorated the housing and mortgage market as a whole, with participating and non-participating lenders getting in on the high loan-to-value bandwagon.
Sylvia Waycot, editor of Moneyfacts.co.uk, comments: "At the scheme's inception in October 2013 there were 58 mortgages on offer with a 95% LTV, ten of which were a part of Help to Buy phase 2. Today the 95% market has grown to 176 products, with 48 of this number being Help to Buy mortgages."
"Not all lenders have joined the Help to Buy scheme, but this has in no way curbed the increase in FTB mortgages on offer, with many building societies offering competitive 95% mortgages outside of the scheme."
It's great news for first-time buyers who are hoping to get their foot on the ladder, with far more options available to them than there have been in years. However, it's important to remember that affordability will still play a huge part – even more so since the introduction of new rules following the Mortgage Market Review – so making absolutely certain you can afford the repayments now, as well as when rates rise, is vital.
As Ms Wacot says, "regardless of the number of FTB deals available, potential borrowers still need to satisfy the stringent affordability checks which are the latest hurdle in the race to get on the housing ladder." That means going over your budget should be the first port of call if you're hoping to secure that mortgage, making adjustments where necessary so you can prove your eligibility for the scheme.
If everything comes together then all you've got to do is find suitable deals, and hopefully you'll be able to add to the tally of successful Help to Buy borrowers!
Help to Buy: Equity Loan
Help to Buy: Mortgage Guarantee
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