Extension of the Help to Buy Scheme

Posted: 23/07/2013


George Osborne has released details about a second phase of the Governments Help to Buy Scheme which will aid people purchasing not only new build properties but existing properties.

The latest addition to the Help to Buy Scheme will be released in January 2014 with a £12 billion mortgage guarantee scheme which will allow house buyers to borrow money with only a 5% deposit. The Government will also guarantee part of the loan if the property is worth less than £600,000 as an insurance policy for banks and existing homeowners can also use this scheme if they wish to re-mortgage their property.

However, the Help to Buy scheme will not be available for buy to let landlords, homebuyers that want to purchase a second home or foreign buyers with no UK credit history. Lenders will have to collect a declaration stating that the borrower is not interested in purchasing a home anywhere else in the world.

George Osborne stated that only borrowers that meet the lenders strict income checks will be able to secure a high loan to value mortgage through the help to Buy Scheme. It has not yet been decided what the commercial fees will be for lenders in order for lenders to obtain the guarantee or whether lenders will be given capital relief for offering high loan to value mortgages. According to the Treasury, the fees will be banded depending on the loan to value but this it yet to be finalised. The Council of Mortgage Lenders have stated that this will be a deciding factor for whether mortgage companies decided to sign up to the Help to Buy Scheme or not.

BMV property in LiverpoolThe extension of the Help to Buy Scheme has come just four months after it revealed the Help to Buy Scheme which is the centrepiece of the 2013 Budget. The Help to Buy Scheme was active in April and has been deemed a success by the Government with almost 7,000 reservations on newly built housing through the scheme.

The Financial Times have released figures on the scheme which shows the Help to Buy Scheme has helped people purchase houses mostly outside of London. The largest number of reservations were made by people who wanted to purchase new build houses in the Midlands at a figure of 1,873. This was followed by the South, South West and the South East of England compared to just 314 properties that were reserved within the capital.

The concerns that have been raised about the Help to Buy scheme surrounds the problem of creating demand for properties but not supporting the supply of them. The International Monetary Fund has warned that this could increase house prices and put the first rung of the housing ladder even further from reach.

Would you be interested in the extension of the Help to Buy Scheme which becomes active in January 2014 allowing you to purchase an existing property?

Amanda McGovern, Pali Ltd

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