For existing home owners and those with dreams of becoming home owners one day, the Budget 2013 provided some welcome relief to what is often an uphill struggle to find the hefty deposit now needed to get on, or move up, the housing ladder.
In his Budget – in which he said he was creating an ‘aspiration nation’ - the Chancellor announced funding of £3.5 billion over the next three years to go towards shared equity loans.
From April, this means anyone wanting to buy a newly built home can access an equity loan worth 20% of the property value, with the buyer finding a 5% deposit. It is interest free for five years and is aimed at injecting life into the property market – helping the buyers and the property developers.
Previously only first time buyers where included in such schemes, but now, as long as the property value is not more than £600,000, anyone can benefit if they buy a new build home, regardless of income.
The scheme is called Help to Buy and aims to make the aspiration of home ownership a reality for people across the country.
While that part of the scheme only applies to new homes, another option of the Help to Buy scheme is for purchasers of older properties.
The home buyer needs to provide the 5% deposit as before, borrowing the other 95% as a mortgage. The difference here is that £30,000 of that mortgage is guaranteed by the Government, so the lenders are encouraged to offer better access to low-deposit mortgages. This part of the scheme will begin in January next year and will run for three years.
It’s hoped that this will help families who want to mortgage for any home old or new, but cannot find the large deposits typically demanded, to access better interest rates and deals. Up to now, the best mortgage rates have only been available to those able to put down a deposit of up to 20%.
Any help for home buyers is to be welcomed, and the initiatives announced in the Budget will address the issue of accessibility to properties. Now that assistance is being extended to all, not just first time buyers, we should see some positive movement in the property market once again.
By managing partner of residential property and probate, Tom Bridge
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