One of the big surprises of the 2013 Budget is the new Help To Buy scheme. This will see the government topping up deposits of home buyers in a way more commonly done by parents via the so-called “Bank of Mum and Dad.”
There will be two strands to Help to Buy:
Help to Buy: equity loan – Starting 1 April 2013, the Help to Buy: equity loan will be opened up to provide equity loans worth up to 20 per cent of the value of a new build home, repayable once the home is sold. The eligibility criteria for shared equity will be widened, with the government saying the scheme will be open not only to first time buyers but also to all those looking to move up the housing ladder. The maximum home value will be £600,000 and there will be no income cap constraint.
Help to Buy: mortgage guarantee – The Government plans to create a mortgage guarantee scheme to “increase the availability of mortgages for those with small deposits across the UK”. This scheme will begin in January 2014 and will run for three years. It will offer a Government guarantee to lenders who offer mortgages to people with smaller-sized deposits of 5-20%.
The big potential benefit of these schemes will be enabling those with smaller self-saved deposits to access lower mortgage rates, thanks to the Government taking a share to raise the overall deposit.
Read the details for yourself by downloading the 2013 Budget document in full.
Why Help to Buy?
Cheerleaders for the new schemes will point out that not everyone has rich parents, and that even modestly well-off parents are becoming less able to remortgage their own homes to provide deposits for children due to rising living cost.
Critics of Help to Buy will argue that it looks like more support aimed at keep UK house prices inflated. That might be justifiable given our economic predicament, but would it not be more sensible to increase social housing provision to support housebuilders and provide plenty of new jobs and homes, without encouraging people to take out ever-larger mortgages in a market charging even higher prices due to this influx of new money? Such newly State-built homes could have been sold off into private hands at a later date via the Right to Buy scheme.
Surely the last thing we need is a new house price boom?
Help to Buy explained
Regardless of the rights and wrongs, many will want to know how to get their mitts on this government money, and whether it’s a good idea from their own perspective.
The scheme has only just been announced, but the Treasury has already released the following graphic to help us understand what’s on offer:
So what do you think about Help to Buy? Is it a sensible way to tackle Britain’s arguably iniquitous housing issues?
And would you consider using Help to Buy, or would you rather own all your own home for yourself?