Getting a foot on the property ladder has never been easy. I don’t know about you, but I still remember those years of scrimping and saving before I was finally able to buy a one-bedroom flat I could call my own.
Of course, in the years since, house prices have rocketed. According to Nationwide’s latest House Price Index, the average property in the UK now costs £226,129. The flat I bought for £82,000 back in 1998 would now sell for about £270,000.
As recently as 2002, the average property price was £104,000, compared with an average gross household income of £20,596 – that’s a ratio of 5.05. According to the latest data from the Office for National Statistics (ONS), that same ratio now stands at 7.70.
The difficulties of raising a large enough deposit may be one of the reasons why the government’s Help to Buy Equity Loan Scheme has been such a success since its launch in 2013.
More than 272,000 new-build homes – worth around £73bn – have been purchased over the past seven years using this scheme.
However, the initiative was only ever intended to be a short-term fix to the problems faced by buyers struggling to fund a property purchase in the aftermath of the last financial crisis.
I’m sure you are already well aware that the scheme will start to be phased out next year, and will finally draw to a close in 2023, but what you may not be aware of are the two important changes that are being introduced by the government next spring.
The first change affects who’s eligible. From 1 April 2021, a new Help to Buy England scheme is being launched which will only be available to first-time buyers purchasing a new-build property.
As with the current scheme, buyers will be able to borrow 20% of the value of a property, or 40% for those purchasing in Central London, with the help of a 5-year interest-free government loan.
The second charge affects how much they’ll be able to borrow. From the same date, regional property price caps will be introduced, with each area of the country having a maximum property value, ranging from £186,100 in the North East, to £600,000 in London. You can find a full list of price caps by visiting www.helptobuy.gov.uk.
As I mentioned, it has always been difficult to get onto the first rung of the property ladder, and the pandemic has only exacerbated the situation.
I believe it’s vital that first-time buyers continue to get all the support they need.
Here at Precise Mortgages we’re committed to supporting both the old and the new Help to Buy schemes, so people can continue to realise their home-owning dreams.