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BUDGET 2013: Help To Buy scheme unveiled 20 March 2013

Chancellor George Osborne announced the launch of Help To Buy, a new scheme to help the housing market. The scheme has two parts: a £3.5bn capital spend over three years on shared equity loans, and a new £130BN mortgage guarantee.

Under Help To Buy shared equity loans will be available to anyone with a 5% deposit for a home, not just first-time buyers, and will be equal to 20% of a property’s value. The loan will be interest-free for five years and repaid when the property is sold. The scheme will begin on 1 April 2013.

One potential downside of the scheme is that the shared equity loans will only be available for newly-built homes. Osborne said it was “A great deal for homebuyers and homebuilders.”

Homebuyers on all incomes can apply for the loans but the property cannot be worth more than £600,000 which the Chancellor says accounts for 90% of homes.

The second part of Help To Buy is a new mortgage guarantee which will help mortgage lenders lend to buyers without a big deposit.

The £130bn guarantee package will begin at the start of 2014 for three years. The scheme will be available to all homeowners, including those moving up the housing ladder.

For both schemes, borrowers will need to meet appropriate tests to ensure they can pay back the mortgage, as well passing their chosen lender’s credit and affordability checks.

Under Help To Buy mortgages will need to be taken out on a capital repayment basis, not interest-only, and are only available to owner-occupiers, not buy-to-let landlords.

Help To Buy was cautiously welcomed by mortgage lenders.

Council of Mortgage Lenders (CML) director general Paul Smee said: “The announcement of Help to Buy which will help mitigate the risk of those lending low deposit mortgages shows a positive re-focus on promoting home ownership. The benefits will not be immediate, and we need to look at the detail of implementation, but this could have a significant impact in the medium term.”

Stephen Noakes, mortgage director at Lloyds Banking Group, said: “We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme will give a much needed boost to the housing market and most importantly address the issue of accessibility.

“Since the launch of the Government’s Funding for Lending scheme we have seen mortgage rates hit an all-time low, really making a difference to affordability. These proposals will, just as importantly, address accessibility, and provide a genuine solution to the challenge of raising a deposit. Working together these two schemes will get more people on and moving up the property ladder.

“Crucially, this scheme will not only help first time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention.”

By Emma Lunn



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