A government-backed scheme to guarantee homebuyer deposits has been brought forward by three-months, Prime Minister David Cameron has confirmed.
The Help to Buy scheme, originally due to be launched in January 2014, allows homebuyers access to government-backing of up to 15% of the value of any property worth up to £600,000.
A similar scheme, which was launched in April of this year, previously helped only toward new build properties; but with the new phase of funding is now available to the wider market.
It means that, if acceptable, homebuyers can now access a mortgage to purchase the property while providing only a 5% deposit themselves, with the risk to the bank being reduced by the government guaranteeing 15% of the price.
Critics have warned of an ‘artificial housing bubble’ with the new scheme, however Mr Cameron says those fears are unfounded.
"I am impatient to help young people get on the housing ladder. The need is now. I have always wanted this to come in and frankly the earlier the better” said Mr Cameron. “Talk of a housing bubble to people in Manchester or Salford, and they would literally laugh in your face”
The news means that applications for the new scheme can now be made from next Monday, 7th October, with funding available from 1st January 2014.
So far three government-backed banks; Halifax, RBS and NatWest; have signed up to the scheme, although there is some confusion surrounding the costs of such schemes and the products available.
Contractors have traditionally had an unnecessary struggle to obtain mortgage funding; however with the addition of this new scheme there have never been as many routes open to them, even with a lower deposit than would normally be required.
“With the new Help to Buy scheme being brought forward, now is the time to seriously consider buying property” said Taj Kang, Business Development Director at Contractor Mortgages Made Easy.
“With the government funding being opened up to the wider market, not just new-build properties, we will likely see a huge demand for this funding, meaning it may not last the intended three-years. As more banks sign up to the scheme and therefore more competitive products become available to buyers, it will inevitably become a more attractive route to either a first time property purchase, or for existing owners to move up the ladder.”
The government has set aside £12bn of funding for the scheme, which based on the average current UK property price of £242,415, may only provide help for just over a quarter of a million purchases, and with several more mainstream lenders on board that could well mean that the funding could run out.
Article By: Jon Shields, Media Executive at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 01489 555 080