Help to Buy Loans Have Exceeded £10 Billion in Six Years

March 12, 2019 3:57 pm Published by

Since the 2013 Budget when the Government’s Help to Buy scheme was first launched, nearly 200,000 purchasers have used it to get on or move up the property ladder. The majority of these purchasers have been first-time buyers.

The scheme is essentially an equity loan of up to 20% of the value of a new build worth up to £600,000, or 40% if the property is located in London. The loan must be accompanied by a minimum 5% deposit from the buyer. For five years the loan is interest free and when the property is sold, the buyer has to repay the proportion of the property value that they initially borrowed. Here’s an example to help:

  • Property value is £400,000 and buyer wants to borrow 20% as a Help to Buy Equity Loan.
  • Buyer borrows £80,000 (20%) and also contributes £20,000 (5%) as a deposit.
  • Buyer sells home for £500,000 and must pay back 20% of property value.
  • Buyer must repay £100,000.

As of September 2018, the Government had loaned £10.7 billion as part of the scheme. The average loan outside of London is over £50,000 and over 10,000 property buyers now have a home in the capital city. However, many property experts suggest that the scheme has inflated house prices and when it eventually ends, the prices will drop and leave many buyers in negative equity. This will also cause a problem for builders, as they are currently reaping the benefits of increased profits that will plummet.

Before accepting the Help to Buy Equity Loan, be sure you are well aware of all of the pros and cons and be sure it’s a suitable choice for you. It’s also worth exploring all other avenues so that you know you’ve made the right decision.

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This post was written by Innermedia Ltd

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