Why we need to dis­pel con­fu­sion over Help to Buy scheme

Yorkshire Post - Property - - PROPERTY - Sharon Dale

AL­MOST a third of those who in­tend to buy in the next 12 months are first-time buy­ers, the high­est pro­por­tion Rightmove has recorded for over three years.

Yet one in three of them say they don’t un­der­stand phase two of the gov­ern­ment’s Help to Buy scheme, and 42 per cent of all home-movers wrongly be­lieve it is only for first-time buy­ers

More than one in five peo­ple are look­ing to buy as a di­rect re­sult of Help to Buy and five per cent say they are go­ing to sell be­cause of it.

The Help to Buy mort­gage guar­an­tee scheme can help you pur­chase a newly-built home or an ex­ist­ing prop­erty with a de­posit of as lit­tle as five per cent.

Miles Ship­side, di­rec­tor and hous­ing mar­ket an­a­lyst at Rightmove, says: ”Al­though it’s still too early to judge the im­pact of the scheme, we an­tic­i­pate that more first-time buy­ers get­ting onto the bot­tom rung of the hous­ing lad­der could have knockon ef­fects fur­ther up, help­ing more peo­ple to trade up and down­size. Many have post­poned their move over the last few years as ei­ther lim­ited eq­uity or lack of con­fi­dence has left them un­able or un­will­ing to. This scheme has the po­ten­tial to of­fer hope and con­fi­dence to many of th­ese home­own­ers en­abling them to come to mar­ket and free up some much-needed sup­ply.

“But there’s clearly a lot more that still needs to be done to make sure the max­i­mum num­ber of peo­ple who could ben­e­fit di­rectly from the scheme or its knock-on ef­fects, can do so. A sig­nif­i­cant pro­por­tion of peo­ple say they are wait­ing to see what hap­pens – but if they bet­ter un­der­stood how the wider ben­e­fits of the scheme could help them trade up or down­size it might open up more sup­ply and lead to a healthier and more sus­tain­able hous­ing mar­ket. To give first-time buy­ers more of a chance to get on the prop­erty lad­der, and help give po­ten­tial movers higher up the chain the con­fi­dence to move again, the con­fu­sion needs to be ad­dressed.”

Rightmove has teamed up with the Money Ad­vice Ser­vice and con­sumer cham­pion Martin Lewis to of­fer an­swers to Help to Buy ques­tions:

Q. Is it now eas­ier for me to get a mort­gage?

A. It may en­able you to get a mort­gage at a cheaper rate, how­ever it’s very likely that if you only have a small de­posit, there are still go­ing to be some rather harsh credit scor­ing and af­ford­abil­ity cri­te­ria. If you have a five per cent de­posit, a good credit score and can prove you can make re­pay­ments, what is likely to hap­pen is you will be able to get a mort­gage at a more com­pet­i­tive rate. How­ever, if you could push to a 10 per cent de­posit rather than five per cent you will find rates come down sig­nif­i­cantly. If you can push to a 20 per cent de­posit, rather than 10 per cent, then you would find rates com­ing down very sig­nif­i­cantly.

Q. Is it now eas­ier for me to buy a prop­erty?

A. In­di­vid­u­als still need to prove they can af­ford mort­gage pay­ments and meet lend­ing cri­te­ria. If th­ese con­di­tions can be met and you have at least a five per cent de­posit saved, then yes, you may find it eas­ier to ob­tain a mort­gage from a lender par­tic­i­pat­ing in the Help to Buy: mort­gage guar­an­tee.

Q. Will my mort­gage pay­ments go up af­ter the Help to Buy Guar­an­tee ends?

A. No, the Help to Buy: mort­gage guar­an­tee will not im­pact on your fu­ture mort­gage rates. You can ask if the lender of­fers fixed rates. Q. What are the risks? A. You are po­ten­tially buy­ing a prop­erty with a very small de­posit, which means you have a very big loan.

The big­gest risk out there is that in­ter­est rates aren’t just low right now – they are nearly two per cent lower than the prior 200 year his­toric low. We are in an anom­aly time and at some stage in the fu­ture, in­ter­est rates are go­ing to bounce back.

The risk is “could I af­ford to re­pay the mort­gage if in­ter­est rates in­creased”.

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