Help to Buy 2.0 | Plans Unveiled

Why Do First-Time Buyers Need Help?

Typically, first-time buyers struggle to save a deposit as rental costs are high. For example, the average rental cost in the UK is £11,075 per annum whilst the average salary for people between 22 and 29 is £26,500. This means renting costs the average earner between 22 and 29 an astonishing 42% of their income, excluding bills and living costs.

The average property price in the UK is £259,700 according to Zoopla, meaning for a first-time buyer to reach a 10% deposit they must save £25,970. Unlike existing homeowners, first-time buyers do not own equity in a property, this means they cannot gain capital by selling their existing home. However, with the Help to Buy scheme, the first-time buyer may only need to save £12,985 towards their deposit.

What Other Schemes Are Available?

Currently, hundreds of thousands of first-time buyers are looking at schemes such as First Homes and Shared Ownership which both offer alternative solutions to first-time buyers. However, these plans have drawbacks. Shared Ownership allows buyers to purchase a percentage of a property, and then pay a rental fee on the other part. This allows buyers to pay a reduced deposit and live in a property of higher value than they may be able to mortgage. Once they have paid the full equity into the property, they can then increase the equity they wish to own in the property. However, this is often criticised as it can allow buyers to buy a property that is unaffordable to them.

First Homes is a scheme where selected homes are available to first-time buyers at a 30% discount. This allows buyers to meet affordability far easier. However, once the homeowner is ready to sell the property, it must be sold to another first-time buyer at 30% below market value. This scheme is only in effect for new-build properties currently.