Will Help to Buy take off in Brighton and Hove
What does the Government’s decision to launch its new Help to Buy scheme early mean?
For those who don’t know, this is actually the second phase of the Help to Buy scheme. The first phase - a shared equity scheme designed to help people buy new-build only homes with a deposit of as little as 5% - was launched in April, and by all accounts seems to have been quite a success.
The second phase is a Government-backed mortgage guarantee scheme, enabling people to take out 95% loans to buy any property, old or new, valued at up to £600,000. It was due to start next January, but it has now been decided to launch it 3 months early.
What does this decision mean? Well, as from October 7, borrowers can apply for 95% mortgages to purchase both new and secondhand homes up to the price limit, with taxpayers underwriting up to 15% of the risk for lenders. One, the Royal Bank of Scotland, said it was expecting to be so inundated with applications that it would be extending its opening hours.
However, it’s worth bearing in mind that it will be a phased introduction. In other words, lenders will be able to begin writing loans from this month, but the taxpayer-backed guarantee underpinning the mortgages will not be available until January, as previously planned. This means that while buyers with only a 5% deposit will be able to apply for mortgages, they will not actually get the loans through until January 1st onwards, and so will not be able to complete purchases until then.
Why did David Cameron decide to bring the start date forward? No-one really knows – although the announcement did come slap bang in the middle of the party conference season. The Prime Minister himself simply talked of his passion for helping people buy their own homes, and said that support of this kind was needed sooner rather than later.
Either way, with many crucial practical details of the scheme still unclear, the announcement certainly caught much of the mortgage industry on the back foot. One leading broker called it extraordinary, given that many lenders were unsure whether they would be ready for the scheme in January, let alone October…
Locally, in Brighton and Hove, the biggest problem is that first time buyer property is very expensive, so even if you have 25% of £180-220,000, can you get a mortgage for the remainder on the average Brighton salary? That is the big challenge.
Only time will tell, but if you have first time buyer level property you have been thinking of selling, this may be the time to go for it.