GENERATION LIFELINE
Cash-strapped young Londoners need Help to Buy
Young couples need Help To Buy — the scheme must stay
MANY young Londoners have spent the lockdown stuck in a rental property at close quarters with flatmates — or back at home with their parents. Other renters with young children, gearing up to buy their first family home when the coronavirus pandemic hit in March, have spent the last three months in a property they have outgrown.
The long months of restrictions have provided plenty of motivation for those with a deposit to rush to get on the property ladder. And in growing numbers, they are turning to the Government’s Help to Buy scheme to set them on the first rung.
The number of online searches made by mortgage brokers on behalf of home buyers in London has risen by 948 per cent since the start of the lockdown, albeit from a very low base. The number of searches for mortgages using Help to Buy, however, has shot up 1,532 per cent over the same period, according to the mortgage search engine Twenty7Tec used by brokers.
“The housing market has rebounded across the country but Help to Buy in London has noticeably jumped,” says Phil Bailey, director at the software company. “Help to Buy has been a significant part of the mortgage market over the recent past. We expect this to continue,” adds Graham Sellar, head of mortgages for major lender, Santander.
TURNING TO HELP TO BUY
Help to Buy was introduced in 2013 as a way of encouraging developers to keep building new homes in the wake of the global financial crisis. Under the scheme in London, the Government lends up to 40 per cent of the property’s value, the bank lends 55 per cent and the purchaser has to find a five per cent deposit. In other parts of the country, the Government lends up to 20 per cent of value.
This shared equity scheme has grown in popularity year on year but Covid-19 has accelerated this trend, says Savills’ analyst Lawrence Bowles.
“Help to Buy just applies to new-build homes, which was the only part of the market that could function during the lockdown. Buyers were able to view show flats online and take virtual tours,” he says.
Also adding to the appeal of new build, sanitised new homes with no previous owner suit a world gripped with contagion anxiety as a result of the pandemic.
This month big lenders such as Nationwide pulled their 95 per cent loan-to-value mortgages aimed at first-time buyers. “As a result more purchasers without a large deposit could turn to Help to Buy,” Bowles adds.
TIME IS RUNNING OUT TO TAP IN
Help to Buy has courted controversy, however. Some believe it helped prop up a fragile housing market, while others blame it for inflating values in London’s frenetic house price recovery from 2010 to 2015. As a result the Government has decided to wean the country off the scheme as early as next year.
Help to Buy will end for all non first-time buyers and new price thresholds will come in per region, reducing the amount a developer can charge for a new home available using the scheme. Help to Buy is due to end completely in 2023.
Lawrence Bowles of Savills argues that the initiative helps stimulate much-needed supply and could play a vital part in the UK’s economic recovery after Covid-19.
The Government, he explains, “could delay next year’s restrictions because of the current crisis. Or they could extend the 2023 cut off.” However, Help to Buy is expensive for the Government when it has thrown money at the furlough scheme and given emergency handouts for small businesses.
I’M ON FURLOUGH — SO CAN I STILL GET HELP TO BUY?
“Crunch time for the housing market comes in the autumn when the furlough scheme will end and we see the reality of job losses,” says mortgage broker Andrew Montlake of Coreco.
However, some who have worked through the lockdown, or been furloughed with their employer topping up their pay, have managed to add to their deposit pot.
In the early phase of the lockdown, the big lenders withdrew their Help to Buy products because of a lack of capacity. It was difficult to keep pace with demand with a large proportion of the banking workforce on furlough or working from home.
These Help to Buy mortgage products have now returned — Andrew Montlake says there are 190 available. Just like a standard mortgage, Help to Buy loans are available even when on furlough. Affordability will be stress tested against furloughed income, with some lenders asking for written confirmation that an employer intends to bring the employee back to work.
WHERE SHOULD I TARGET MY HELP TO BUY HOME SEARCH?
More new-build homes could become available with Help to Buy if prices fall below the scheme’s current £600,000 threshold in London as a result of Covid-19.
In fact, some developers have registered with the Help to Buy scheme during the lockdown, in an attempt to try to shift properties in an uncertain market.
Here’s a Homes & Property guide on where to look for developments offering Help to Buy across London.
GOING NORTH: HARROW AND HORNSEY
Developer Hill just launched Harrow One, 119 new studios and apartments with private balconies, part of the £1.75 billion Harrow town centre regeneration. The homes are built around a courtyard and there’s a community hub and storage for 400 bikes. Prices start from £285,000. Visit harrowone.co.uk or call 020 3906 1951.
Help to Buy homes launched last month at Clarendon in Hornsey, Haringey, as part of a new 12-acre urban village delivering 1,714 homes. Prices start from £363,080. Call 020 3944 1832.
SOUTH AND EAST: WOOLWICH, CROYDON, DARTFORD AND LIMEHOUSE
Navigator Wharf is the latest phase of Royal Arsenal Riverside in Woolwich. These new homes overlook the river and sit next to Maribor Park. Prices start from £492,500 (royalarsenalriverside.co.uk).
There are just two Help to Buy one-bedroom flats left in the £180 million Langley Square waterside scheme in Dartford. The two homes are priced at £232,000 and £238,000 (weston-homes.com).
In Upper Norwood, Croydon council developer Brick by Brick has completed Auckland Rise & Sylvan Hill, five low-rise buildings with 57 one- and two-bedroom flats. Help to Buy is available with prices from £360,000 and Croydon residents get priority (brickbybrick.com).
The Kiln Works sits on the quayside in Limehouse with Help to Buy one-and two-bedroom flats launching on July 18, priced from £432,500 (nhgsales.com).
TO THE WEST: HANWELL AND SOUTHALL
Open-plan flats overlooking lawns and podium gardens are available at Aspire @ St Bernard’s Gate in Hanwell, Ealing. Prices start from £360,000. Call 020 3369 0138.
In Southall Village on the Grand Union Canal, three townhouses are left for sale. Southall, like nearby Hanwell, is being caught up in regeneration sweeping west London. Prices from £545,000 with Help to Buy. Call Catalyst on 020 3993 6438.