Without wishing to sound too Jane Austen about things, it is a truth universally acknowledged that the housing market can be a difficult place for buyers. High prices mean that many people who are perfectly able to afford monthly mortgage repayments struggle to raise a deposit and that situation has grown worse in the last decade.
Halifax found, for example, that the average deposit for a first-time buyer was £17,499 in 2007 but rose by 88 per cent to £32,927 in 2016 – racing ahead of the UK’s average salary.
The Government’s solution has been to launch a number of schemes to help nudge the first rung of the housing ladder back within reach of buyers struggling to save the cash they need.
One such scheme is the Help to Buy Mortgage Guarantee Scheme.
What is the Help to Buy Mortgage Guarantee Scheme?
Help to Buy in general is an umbrella term covering the Government’s measures in this sector. Other programmes include ISAs that offer preferable rates for those saving up for a new home, equity loans and shared ownership deals.
The mortgage guarantee scheme, however, sees the Government step in to support an applicant’s mortgage. In effect the Government guarantees to the lender that it will step in if there is an issue and the mortgage cannot be repaid. This aims to give the lender greater confidence to part with the money, with the Government agreeing to ‘cover’ part of the loan.
That, in turn, means that the recipient needs to account for less of the overall loan and, thus, less deposit. Many lenders will then be prepared to accept a deposit as low as five per cent, safe in the knowledge that it has a Government guarantee.
How Help to Buy Mortgages Work
Before you apply, here’s everything you should know about help to buy and how the scheme works in practice:
*You must still be able to fund at least five per cent of the purchase price of a property – the Government still needs this as evidence that it is lending to serious buyers
*The property purchased can be new or old and priced up to £600,000 and must be based in the UK
*You cannot use another Help to Buy scheme at the same time
*You must take out a repayment mortgage – and convince a lender that you can afford the payments. This isn’t a guarantee of getting a mortgage, but a guarantee of a portion of the
*The property must be for you – the Government doesn’t want this to be used to fund properties to be rented out
*The total cost of the mortgage must be less than 4.5 times your income
*The scheme is open until December 31, 2016
Has the scheme been popular?
The most recently released batch of stats from the Government shows that 73,726 mortgages – of a total value of £10.9 billion – have been completed with the support of the scheme since October 2013. The figures show that 79% of those helped were first time buyers, with the average property price paid by buyers using the scheme standing at £155,897.
*This is a collaborative post*