Budget 2013: Boost for shared equity mortgages
Chancellor George Osborne revealed in his Budget that he hoped to allow homebuyers with smaller deposits to get onto the housing ladder under the ‘Help to Buy’ initiative. This will see the existing FirstBuy and Newbuy schemes extended to include all buyers wishing to purchase a new-build home.
The scheme will also be extended to include all properties valued at less than £600,000. Buyers will raise a deposit of 5% while government will contribute 20% of the sale price. The loan will be interest-free for 5 years.
“We’re going to commit £3.5bn of capital spending over the next three years to shared equity loans,” Osborne told the House of Commons.
“From the beginning of next month, we will offer an equity loan worth up to 20% of the value of a new build home – to anyone looking to move up the housing ladder.
“You put down a 5% deposit from your savings, and the government will loan you a further 20%.
“Previous help was only available to those who were first-time buyers, and who had family incomes below £60,000.
“Now help is available to all buyers of newly-built homes on all incomes.”
Terry McCutcheon, CEO of Finance Planning Group said:
“The Help To Buy scheme will be a real boost to people wanting to get on the housing ladder. It really should stoke the fire for the getting the housing market moving again. First time buyers are a vital part of the housing ecosystem that have been scarce for too long.
“The shared equity aspect also means that many people will only need a 5% deposit to buy a new-build property. This is most welcome because it means that for many people, their housing costs will reduce, freeing up money to save for the medium and longer term. It’s very positive news.
“The one thing that hasn’t been addressed at this point, is the shortfall in housing supply – where are all these new-build properties going to come from?”
Frank Nash, tax partner at London Chartered Accountants Blick Rothenberg, observed:
“The maths suggest that the Chancellor has 110,000 shared equity homes in his sights under the Help to Buy scheme. This will only be deliverable if local planning can accommodate this allocation”.
Robert Bartlett, CEO of Chesterton Humberts, added:
“I am still questioning whether there was enough in the Budget to really build on and sustain the momentum seen so far this year.
“To put it into perspective, the Help to Buy mortgage guarantee scheme has an allocation of up to £12bn and the equity loans scheme is worth £3.5bn, figures which seem slightly less significant when compared against the £80bn Funding for Lending scheme launched last July, although admittedly not all that funding is for housing.
“Again, looking at the equity loan scheme, this expects to support up to 74,000 purchases but this equates to just 7.9% of 2012 transactions and a meagre 4.6% of 2007 transactions.”