Budget 2013 – Help to Buy Scheme

In an attempt to help more people onto the housing market and boost the property sector Chancellor Osborne announced the launch of the ‘Help to Buy’ scheme, with the government providing an equity loan of up to 20% of the new property’s value. ‘Help to Buy’ consists also of a mortgage guarantee scheme with lenders incentivised to make more mortgages available for people with smaller deposits.

The Help to Buy equity loan scheme is available from 1 April 2013 for purchases of new homes. For those looking to purchase either new builds or existing properties, the Help to Buy mortgage guarantee scheme is available from 1 January 2014.

The loan will be available to all, rather than just first time buyers and a 5% personal deposit is required. The property value must not exceed £600,000 and there is no cap on the amount of income earned by the loan applicants.

This sounds like good news for those struggling to raise the required finance for a property, either getting started on the housing market or moving up the ladder but with little equity accrued so far. Additional benefits to buyers of taking out a Help to Buy loan are that the loan is only repayable once the home is sold and is interest free for the first 5 years.

Critics of the scheme argue that it will benefit sellers more than buyers as it will push up house prices. The risk appears to lie with the government and there are concerns that it doesn’t create another property bubble.

The scheme is designed to be in place for three years and takes effect from 1 April 2013..