Over 400,000 first-time buyers have been helped to home ownership since 2010 through Help to Buy and Right to Buy.
Help to Buy is no longer an option as of March 2023 and Right to Buy is only an option for council and housing association tenants. So will the upcoming budget give any good news about a new route into affordable home ownership?
Rishi Sunak is under pressure after going back on his house-building targets
First-time buyers are waiting for a new solution
What was the old Help to Buy scheme like?
The Help to Buy scheme was first launched by George Osborne a decade ago.
The Help to Buy equity scheme allowed first-time buyers with a 5 percent deposit to borrow an equity loan to cover between 5 per cent and up to 20 per cent of the property purchase price, reaching 40 per cent in London.
Without the equity loan, lots of borrowers wouldn’t have qualified for a mortgage because of a shortage of deposits. With the equity loan, they could put down a bigger chunk of a property’s market value and qualify for mortgage deals with a lower interest rate.
The old scheme ceased in March 2023.
What will the new Help to Buy scheme look like?
It’s been suggested that murmurings about a new Help to Buy scheme are nothing but a forced response to proposals by Labour to help new buyers. With that in mind, information about the updated Help to Buy has been vague so far.
However, with pressure on the government to help people onto the property ladder experts suggest that the scheme is set to make a return. Could a new Help to Buy scheme be an attempt to attract young voters ahead of the 2024 general election after an abysmal local election that resulted in the loss of 1000 Tory seats?
Details are thin and the prospect of a more affordable way to buy a home could turn the heads of labour voters who would previously have laughed off the idea of voting Conservative.
Will more new build houses increase property prices?
It’s argued that some developers previously used the old Help to Buy scheme to inflate the price of new build properties.
A new scheme that makes homeownership achievable for more people is likely to drive demand and that could increase prices for properties old and new.
There is currently a shortage of housing and Rishi Sunak decided to u-turn on previous plans to make local councils build 300,000 new homes a year. With the target now scrapped, many fear that the shortage of housing stock will only get worse.
It’s hoped that the announcement of a new Help to Buy scheme will follow with plans to build new homes too.
What are the alternatives?
A 100% mortgage
Skipton Building Society has launched a deposit-free mortgage aimed at renters who have 12 months of records for rent payments made on time and in full. While the interest rate is more expensive than the average five-year fix of 5%, it could allow those with a good credit history to buy a home without a deposit or a guarantor.
A 95% mortgage
There is a wider range of lenders that offer mortgage agreements with a 5% deposit therefore a larger pool of people are likely to qualify for a 95% mortgage as a route for homeownership.
Shared Ownership
The scheme allows eligible buyers to purchase a minimum of 10% of a property in contrast to the usual 100%. Buying a share of a property means the buyer needs a smaller, more affordable mortgage.
The portion of the property they don’t yet own can be bought over time however, buyers aren’t required to purchase further shares under Shared Ownership.
Right to Buy
Council and Housing Association tenants that have lived in their home for 3 years or more can apply to buy it at a reduced rate.
The discount provided through the Right to Buy scheme can be up to a maximum of £84,200 in England, £16,000 in Wales, and £60,000 in London.
There are options if you want to buy a home
You might believe you can’t get a mortgage with all the news of interest rate rises, high deposit requirements and lack of housing but you could be wrong. Even if your situation is a little complicated, we can take the time to find a solution.
A good mortgage broker can listen to what you need, learn about your situation and find an affordable lender to approve you.
Tell us about your hopes for homeownership
WhatsApp us if you have questions and someone will reply as soon as they can with further information. We also have a quick contact form here if you’d prefer and you’re welcome to call us on 023 8098 0304.