Join CityClub Today to Receive:
The extension of the scheme should help thousands of potential homeowners. This is particularly useful for first-time buyers who missed out on the government’s help-to-buy scheme, which is no longer accepting applicants. One reason the scheme was extended is lenders’ reluctance following the pandemic to offer high LTV mortgages.
As house prices and interest rates have both risen, bank lenders suggested the government continue the scheme. The goal is to keep property market activity high and increase options for buyers. The UK property market has seen an influx of activity over the past two years and has helped local economies.
Read more about the interest rates in 2023, here.
To be eligible for the scheme the property cannot be a new build and must cost less than £600,000. Additionally, the buyer must be able to secure a 95% LTV mortgage. This is usually used by first-time buyers who struggle to secure a deposit. Despite this, unlike the help-to-buy scheme, it is not limited to first-time buyers, and anybody can take advantage.
Buyers are struggling to get on the property ladder because house prices have skyrocketed to record-breaking figures. The government is keen to support the property market and continue its rapid growth across the UK. The total value of mortgages the scheme has supported so far by the scheme totals is around £4.4bn.
Ultimately the disadvantage of high LTV mortgages is that they are more expensive. The higher cost is a result of the increased interest rates, as lenders deem them high risk. Also, mortgage repayments are typically larger as less of the total price is covered by the deposit. Usually, there are fewer lending options with 95% LTVs when compared to 90% LTV mortgages.
While buyers can benefit from using a lower deposit value, the repayments are still high. If a buyer has only been able to secure 5% towards their deposit, they may be less likely to have high disposable income. This is not always the case though, as many prospective buyers are on different parts of their journey. Some buyers may have only secured a 5% deposit as they have been saving for less time.
To find out more about the impact of 95% LTV mortgages, read more, here.
Lifetime ISA is a long-term savings product to help support young people who are saving for their first home or in later life. The money that is put into the ISA will gain interest over time. If the account holder draws money out of the ISA early, they will be charged a fee.
Shared Ownership allows the buyer to purchase a percentage of their property (between 25% to 75%) and pay rent on the remaining share. In some cases, the buyer is able to ladder their mortgage to eventually get full ownership of the property. The scheme was introduced as an affordable way for aspiring homeowners to secure the property of their dreams, with a smaller deposit.
First Homes allows first-time buyers to use a 30% discount when acquiring their home. The homes available under the arrangement are specially built for the scheme. The next buyer will receive a 30% discount when selling a property using the First Homes scheme. The house will permanently have a 30% discount applied once purchased under the scheme.
To read more about the impact of the First Homes scheme, read more, here.
House Prices 2024 | UK Property Market Outlook
In Zoopla’s UK property market outlook, house prices in 2024 will continue to drop to adjust to mortgage rates. However, if mortgage rates...
UK House Price Growth Rate Widens North-South Divide
The UK house price growth rate has slowed from +0.6% in July to +0.1% in August. This is the lowest house price inflation has been since 2012. But...
The Best City for First-Time Home Buyers
Since 2019’s pre-pandemic property market, first-time buyer demand has increased by 6% during the same period. Most of this demand is driven by...
100% Mortgages: The First Homes Scheme
The average price of properties in May 2023 increased by 1.8% to £372,894, reaching a new record for this year. These rising prices coincide with...