Things Are Looking Up For First Time Buyers

There’s always talk in the media about the need to do more to help young people get a toehold on the housing ladder.

But would it surprise you to learn that nearly a quarter of a million first time buyers have moved into their new homes in recent years thanks to Government schemes?

Figures from the Department for Communities and Local Government show that more than 240,000 first time buyers were helped to buy their first homes thanks to various “Help to Buy” schemes.

Stewart Simpson, Owner and Director at Simpsons Estate Agents has seen the evidence: “Abingdon has a lot to offer young people, especially young families, so I’m not surprised that around a fifth of the properties we’ve sold since opening have been to first time buyers. I think that’s proof that these Government initiatives are working.” 

Help to Buy schemes

As you might expect, government schemes are never straightforward and George Osborne announced a number of different schemes when he was Chancellor, but it’s worth getting your head around them to see if you too can take advantage of this rare example of official generosity.

Here’s the Simpsons guide to some of the most popular schemes.

Help to Buy: Equity Loan

The Government is offering buyers up to 20% of the value of a newly-built home as a loan, to be paid back when it’s sold. This means the purchaser only has to find 5% for the rest of the deposit and apply for a 75% commercial mortgage to make up the rest.

The loan is charge-free for the first five years so it’s no wonder it’s helped in more than 120,000 property sales. However, the loan does have to be paid back when the property is sold, along with a 20% share of any increase in its value.

Help to Buy: ISA

Since the ISA scheme was launched in December 2015, more than 62,000 completions have been made across the country using it.

First-time buyers get a 25% bonus if they use their Help to Buy: ISA to pay for a deposit on a property worth £250,000 or less (£450,000 or less in London).

This means that for every £1000 saved, they receive £250 from the government, up to a maximum of £3,000.

Help to Buy: ISA accounts can be set up through banks, building societies or credit unions, but be warned - the scheme closes to new savers from 30 November 2019, although existing account holders can still make deposits until 30 November 2029. Help to Buy: ISA government bonuses must then be claimed before 1 December 2030.

Lifetime ISA

The Lifetime ISA offers a tax-free 25% boost to your savings up to a limit of £1,000 a year. It can either be put towards retirement or buying your first home up to the value of £450,000. It can be combined with your Help to Buy: ISA.

The scheme is for savers aged 40 or under who can save up to a maximum of £4,000 a year.

London Help to Buy

This scheme gives buyers in the capital an equity loan of up to 40% to reflect the difficulty of buying in London. So far it’s helped nearly 3,250 buyers in 32 boroughs to purchase their own property between February 2016 and March 2017. Unfortunately it doesn’t include Abingdon!

Starter Homes Scheme

200,000 new homes will be built under this scheme and sold at a minimum discount of 20% of the market price to first-time buyers aged between 23 and 40. Starter Homes can’t be resold or rented at market value for at least five years after purchase.

Forces Help to Buy Scheme

Personnel serving in the regular Navy, Army or Air Force can take advantage of this scheme to get them onto the property ladder. Launched in 2014 until 2018, it allows personnel to borrow up to 50% of their salary up to a maximum of £25,000 for their first home. The loan is interest free and is repayable over ten years.

Mortgages

As a result of these schemes, more lenders are offering mortgages with a 5% deposit. There is a greater percentage of first time buyers out there now and the industry has responded with new products to help them make the most of these schemes.

Remember though that all good things come to an end and Theresa May already announced last year that the current schemes will be coming to an end over the next few years. We wait to see what, if anything, replaces them. In the interim, if you’re a first time buyer make sure you seize the opportunities whilst they are still available.