February 3rd, 2016
The government scheme “Help to Buy London” has come into force aimed at offering aspiring homebuyers in London a helping hand onto the property ladder. The scheme offers homebuyers interest-free loans of up to £240,000, through an equity loan scheme.
The scheme will be available to buyers of new properties costing up to £600,000 in Greater London.
Help to Buy London is an extension of an existing government scheme; however the amount of money available to loan from the government is doubled. Borrowers will still be required to raise a deposit of at least 5%, and will need to take out a mortgage to cover the remaining 55%.
The new scheme was announced by the Chancellor George Osborne during the Autumn Statement, in response to recent data showing a further 12.4% increase in house prices in the capital in 2015.
The original Help to Buy scheme resulted in a 60% rise in the number of first-time buyers across the UK. But it had significantly less impact in the capital.
Under the original scheme, the government lends homebuyers up to 20% of the property value, while Help to Buy London loans are up to 40%. To access the scheme, buyers have to prove that they will be able to afford paying interests on the loan after the first five years.
The interest is charged at 1.75% plus any increase in inflation (via the Retail Price Index) plus 1%. Borrowers must pay back the equity loan when they sell the home, or at the end of the mortgage period – whichever comes first.
Home buyers don’t have to take the full 40% loan, and can still use the scheme with larger than 5% deposits.
Both first-time buyers and existing homeowners looking into buying a new-build house, through one of the builders registered with the scheme, will be able to benefit from the interest-free loans offered.
Contractor friendly lenders such as Halifax, Leeds Building Society and Nationwide have signed up to offer the scheme. Leeds Building Society is offering rates as low as 1.79pc on a two-year fix (with a £799 fee) and Nationwide is offering 1.89pc on a two-year fix (with a £999 fee).
Article By: Bradley George, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Ratchelle Deary, Public Relations Manager
Tel: 01489 555 080