Oliver Adair MAB

How has the introduction of Help to Buy in 2014 affected the wider property market?

The Help to Buy equity loan scheme, known as Help to Buy 1, was officially introduced in April 2014. The initiative has since been a huge success, giving buyers with small deposits the chance to get onto the housing ladder, as well as aiding the recovery of the housing market.

Here the UK’s leading independent mortgage broker, Mortgage Advice Bureau, explores how the introduction of the Help to Buy schemes has fared throughout 2014.

Only available on new build properties worth up to £600,000, the Help to Buy 1 scheme can be accessed by all borrowers. However, applicants must not have another property and cannot take out loans on an interest-only basis nor let the Help to Buy property out.

“To buy a house using the scheme, borrowers contribute a deposit worth 5% of the property’s value whilst the government provides a loan equivalent to 20%. The remaining 75% is obtained from a traditional mortgage lender. This means that a buyer with a £10,000 deposit could access finance which enables them to purchase a house worth £200,000 under the scheme,” said Oliver Adair from Mortgage Advice Bureau.

The Help to Buy mortgage guarantee scheme, known as Help to Buy 2, helps homebuyers with good credit records who can afford to purchase the property outright with a deposit as low as 5%. These include first-time buyers trying to get onto the property ladder and ‘second movers’ needing to move up the ladder to a bigger home.

The Help to Buy 2 loan is not available for buy-to-let landlords, second homeowners or for a shared ownership purchase.

Oliver added, “Data from our National Mortgage Index shows that the average deposit paid by a Help to Buy 2 applicant was just £7,856 in November 2014 – the lowest point of the year and 7% lower than the previous lowest point. This means that applicants need 89% less than those purchasing in the wider market, with the typical deposit being £68,828.”

After consistently reaching its targets throughout 2014, Help to Buy 2 has attracted buyers with lower salaries who are looking for more affordable properties. Alongside the new Starter Home scheme, which was announced in December, first-time buyers now have numerous opportunities to find varying affordable routes into the property market.

“To see how you could benefit from one of the government-backed schemes, you should seek help from a professional mortgage adviser who will be able to guide you through the steps and recommend the right scheme for your situation,” concluded Oliver.