2013 Budget – Help to Buy

The 2013 Budget’s ‘Help to Buy’ scheme is aimed at tackling long-term problems in the housing market by providing equity loans and mortgage guarantees for purchases of property worth up to £600,000.

The equity loan element of Help to Buy, available from 1st April 2013 for three years, will give house buyers with a deposit of at least 5% access to up to 20% of the value of a new build property. The equity loan is interest free for the first five years, after which a fee of 1.75% is payable, then rising annually by 1%.

Help To Buy

Help To Buy

The mortgage guarantee element will be available from January 2014 for three years but is not restricted to those wishing to buy newly built properties. The government will not be guaranteeing a borrower’s mortgage repayment but will instead provide lenders the option to purchase a guarantee from the government. If a borrower’s property is repossessed, the government will cover a proportion of the losses suffered by the lenders, but otherwise leaving commercial decision-making with lenders.

IWG COMMENT:     Whilst the government has further recognised the need to break the inertia currently afflicting the housing market, an unwillingness to burden the nation’s balance sheet to the extent required to overcome dire housing shortages is evident. House prices, particularly in the South-East, will remain out of reach for the vast majority, and the issue of building homes has not been addressed. Serious questions must also be asked as to whether the government should rely almost entirely on its own credit rating to boost home ownership – memories of sub-prime’s contribution to home ownership still haunt us.

Housing shortages, high prices and rigid planning laws mean that these schemes, although welcome, will not be a silver bullet.