The UK Government’s Help to Buy scheme is now the most popular way for first time buyers to get on to the housing ladder, new research suggests.
As well as helping first time buyers who can afford to pay a mortgage but are struggling to save a deposit it eases the pressure on families to plug gaps in savings, says the study from mortgage and loans provider Ocean Finance.
It found that half of first time buyers would use the Help to Buy equity loan or mortgage guarantee schemes to overcome the barrier of having a small deposit at a time when deposits are the biggest barrier to getting on the housing ladder.
The Government started the Help to Buy scheme in 2013 in an attempt to kick start the housing market following the financial crisis which saw lenders tighten their mortgage lending rules and most 95% mortgages disappear. This meant borrowers needed to fund deposits of at least 10% and often, up to 25%, which took home ownership out of the hands of many first time buyers.
Almost 40% of first time buyers questioned said being able to save a big enough deposit is the main barrier to owning their own home. This is following by rising house prices, which makes it harder to fulfil tough affordability checks and at the same time, pushes the amount needed for a deposit even higher.
Alongside its equity loan and mortgage guarantee schemes, the Government is set to launch a Help to Buy ISA this autumn. The ISA is designed to boost the savings of first time buyers with a top up from the Government of 25%, up to a maximum of £3,000 on savings of £12,000. Almost a quarter of those questioned by Ocean said they planned to open a Help to Buy ISA. That compares with 14% who expect to rely on help from their families to fund their deposit.
‘The Help to Buy scheme is doing its job and helping to remove the deposit barrier that many first-time buyers face. Too many first time buyers have been frozen out of the housing market because they couldn’t save the 25% needed to get the best deals and make their mortgage affordable,’ said Gareth Shilton, Ocean’s spokesperson.
‘It’s interesting to see appetite for the new Help to Buy ISA also, and we’re looking forward to seeing take up levels of this scheme once it’s launched. The big question, of course, is what will happen when the Government steps back from supporting schemes to get the housing market moving. House builders and lenders need to be having conversations to see how they can work together to ensure the momentum isn’t lost,’ he added.
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Source: Property News Spain