To date, around 300,000 people have taken advantage of the Help to Buy Scheme the government has put in place to help first-time buyers. The scheme is as popular as ever with an extra £10 billion set to be funnelled into the scheme until 2021 but is it all positive?
When the scheme was first introduced in April of 2013, around 2000 people used it to get a loan for their first house; it meant they could borrow up to 20% of the purchase price of the home whilst only needing to find a 5% deposit on their own. For those who cannot afford to buy a house outright or secure a mortgage (most first-time buyers) surely this is the answer because it does exactly what it says on the tin, help you to buy a home. So, what are the downsides?
There may be some supposed ‘cons’ to the scheme but it is commonly agreed that the positives outweigh the negatives. The issue with the actual loan is that it will keep getting interest added to it, which may not present a short-term problem but could affect your finances more than you think in a few years to come. The equity loan is not fixed and will fluctuate with the market, meaning the value of what you pay back could increase vastly.
Once a young person gains their independence, one of the first things they have on their list is obtaining a mortgage. The word mortgage can be scary and is usually blanketed as a dull day at the bank but it is important to note that not all mortgages are the same. Not all places offer Help to Buy mortgages, meaning first time buyers can only borrow from certain lenders. Even those who do offer Help to Buy mortgages can alter their standard packages in order to adjust to the scheme.
However, all these ‘cons’ seem to be rather small caveats for the ultimate goal, which is to secure a house. Help to Buy means first time buyers don’t have to worry about saving for years and years just to make up a deposit. Given that the deposit is only set to 5%, it means a lot more people will see themselves on the property ladder before they know it.
What’s more is that there is no interest on the first five years and buyers could even end up gaining cheaper mortgage rates because they need to borrow less overall. The scheme offers a choice of homes by allowing purchase on new build properties as well as second-hand homes. For those who cannot afford to buy a home even with the help of an equity loan there are other options – shared ownership.
Shared ownership is a popular alternative for first-time buyers earning less than £80,000 a year (£90,000 in London), allowing them to buy a share in a house or a flat. This part of the scheme is more flexible than its counterpart as it allows the buyer to purchase anywhere in-between 25% and 75% on initial purchase.
With both of these options being widely available to youngsters across the country, it poses the question whether this will remain popular for the near future. Some argue that the terms of the scheme could change at any time whilst others promote its benefits whole-heartedly. Only time will tell whether the government’s plan really helps today’s youth.