Get on the housing ladder with Help to Buy

Wednesday, 03/12/2014 House


The government's Help to Buy scheme is available to help people into home ownership and has helped almost 40,000 buyers to enter the property market since its launch in 2013. It has proven very effective in assisting first-time buyers who have struggled saving money for deposits. It has also helped borrowers raise enough to buy in the areas they want to live in where they would otherwise have been priced out.

The scheme is designed to help buyers with small deposits to secure loans since the credit crunch reduced loan lenders' desire for risky lending. It also aims to help existing owners move up the housing ladder and to provide a boost to the construction industry.

The loans and guarantees under the scheme help buyers to secure mortgages for properties costing up to £600,000. Buyers have two options for government-backed assistance under the scheme.

The Equity Loan option is restricted to new build properties and provides assistance for buyers who have struggled saving money for a deposit. The buyer only needs to save a 5% deposit and the government provides a further loan of up to 20% of the property value through the Homes and Communities Agency (HCA). The combined 25% deposit gives buyers access to much better mortgage rates from loan lenders. Borrowers can repay the loan at any time without penalty. The Equity Loan scheme is available until 2020.

The second option in the scheme is the Mortgage Guarantee. This is designed to give borrowers a better chance of getting a mortgage approved by loan lenders when they only have a small deposit saved. Mortgage guarantees are available on both new build and existing properties, so helps both first-time buyers and existing homeowners owners, but the maximum property value of £600,000 is the same.

In the scheme's first year:
- over 80% of participants were first-time buyers
- the average house price was £187,800, well below the national average of £265,000
- 94% of properties were outside London

It is important to remember that your home may be repossessed if you do not keep up the payments on your mortgage.

Payday loans are not suitable for, and would be expensive as, a means of longer term borrowing and are not appropriate if you are in financial difficulty.

Representative 1269.7% APR

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk