Get buying, with a little help
An innovative scheme seems to be having the desired effect, discovers Kirsty McLuckie
t HAS been just less than a month since the introduction of the government-backed Help to Buy scheme, but it looks like it has been received with enthusiasm not just by the industry, but by buyers. the Help to Buy (Scotland) scheme aims to both stimulate the house-building industry and to help people to buy a new-build home here, and 260 applications have been completed in just the first three weeks.
the idea behind the scheme is that those who have been priced out of a property purchase by the needs for a high deposit will be able essentially to borrow most of their deposit from the Scottish Government, interest free.
Similar schemes have been available from individual house builders before, and a slightly different plan was introduced in England in April, but from 30 September, buyers in Scotland have been able to apply for the scheme, which sees applicants having to finance just 80 per cent of a purchase price including a 5 per cent deposit. It is likely to prove as popular north of the Border as south; in England, 12,500 sales were recorded in the f irst six months.
Help to Buy (Scotland) is available to all buyers, not just first-timers, although it is not extended to those buying additional second homes. there is an upper price limit of £400,000 and it only applies to newly built properties, unlike the scheme in England which has an upper limit of £600,000 and applies to second hand homes.
More people realise that a property purchase is within their grasp
Both schemes are designed to help those buyers who haven’t got a large deposit to secure a loan. In recent years, first-time buyers have been particularly hard hit, with no equity in an existing property and many have opted to remain in long-term rental accommodation or with family instead of buying. this has had an impact on the building industry, with new house completions falling to record lows in the past five years.
the Help to Buy (Scotland) scheme sees the Scottish Government underwriting an equity stake of up to 20 per cent of the value of the property, which can be repaid at any time, or can run the length of the mortgage before repayment. to qualify, the buyer needs to have at least a 5 per cent deposit, have an agreed 75 per cent mortgage from an approved lender and be buying a property from an approved builder, but the early signs are that the scheme is popular. the first purchases using the scheme have already taken place, and reports from housebuilders suggest that viewings are up as more people realise that a property purchase is within their grasp.
It is easy to see the attraction: for a property priced at £200,000, a traditional purchaser with a 75 per cent mortgage offer would need to have saved £50,000 in cash. Using the Help to Buy (Scotland) scheme, they would need only £10,000 of savings, taking £150,000 as a mortgage and the remaining £40,000 as a loan. Crucially, the loan is interest free, unlike the scheme in England and Wales. the government retains that stake in the house until it is sold or the loan repaid. If the house has gained or lost value in the intervening time, the amount repaid will change, but will always be the percentage borrowed.
the scheme is available until March 2016, but the funds are limited; the government has promised £220m, but, early applications indicate that it is likely to prove popular.
Among the f irst to take advantage of the scheme in Scotland were a young newly married couple, Rhys Morris (22), a customer support assistant at Edinburgh’s Royal Infirmary Hospital, and his wife tanya (23), a deputy retail manager, who have reserved a two-bedroom property at taylor Wimpey’s Hopefield Grange development in Bonnyrigg.
Rhys says: “My wife tanya and I have been struggling for such a long time to be in a position to buy our own home. We’ve been looking for about three years, but just couldn’t afford to raise the level of deposit that was needed to get a mortgage. We’ve both got great jobs so we knew the mortgage repayments would be manageable, so it has been really frustrating not to be able to get a mortgage.”
the couple were living with tanya’s parents, but happened to be visiting a development on the day the scheme launched and so were one of the f irst to apply. taking advice from an independent financial advisor, who explained the process, they describe the purchase as “hassle-free”.
Elsewhere, developers are reporting an upturn in viewings as would-be buyers investigate the opportunities of the scheme. Particularly for those looking at entry-level properties, buying with a 5 per cent deposit and 75 per cent mortgage is often much cheaper than renting an equivalent property.
Homes for Scotland, the industry body, has welcomed the introduction of the scheme and described it as “gamechanging” in terms of reversing the job losses in construction and tackling the shortage of housing in Scotland. Early indications of the levels of take up suggest they may be right and the scheme will help the industry as much as hard pressed buyers.