22nd June 2015
The Government’s Help to Buy scheme is now the route of choice for first-time buyers looking t o jump onto the housing ladder, according to research from Ocean Finance.
The analysis from the mortgage and loans provider found that half of first-time buyers said they would use the Help to Buy equity loan or mortgage guarantee schemes to overcome the barrier of having a small deposit.
The Government started the Help to Buy scheme in 2013 in a bid to kick-start the housing market following the financial crisis, which saw lenders tighten their mortgage lending rules and most 95% mortgages disappear.
This meant borrowers needed to fund deposits of at least 10% and often, up to 25%, which took home-ownership out of the hands of many first-time buyers.
Almost 40% of first-time buyers questioned said being able to save a big enough deposit is the main barrier to owning their own home. This is following by rising house prices, which makes it harder to fulfill tough affordability checks and at the same time, pushes the amount needed for a deposit even higher.
Alongside its equity loan and mortgage guarantee schemes, the Government is set to launch a Help to Buy ISA this autumn. The ISA is designed to boost the savings of first-time buyers with a top-up from the Government of 25%, up to a maximum of £3,000 on savings of £12,000. Almost a quarter of those questioned by Ocean said they planned to open a Help to Buy ISA. That compares with 14% who expect to rely on help from their families to fund their deposit.
Commenting on the results, Gareth Shilton, Ocean’s spokesperson, says: “The research indicates that the Help to Buy scheme is doing its job and helping to remove the deposit barrier that many first-time buyers face. Too many first-time buyers have been frozen out of the housing market because they couldn’t save the 25% needed to get the best deals and make their mortgage affordable.
“It’s interesting to see appetite for the new Help to Buy ISA also, and we’re looking forward to seeing take-up levels of this scheme once it’s launched. The big question, of course, is what will happen when the Government steps back from supporting schemes to get the housing market moving. House builders and lenders need to be having conversations to see how they can work together to ensure the momentum isn’t lost.”