Could Help to Buy Make 2014 the Year to Jump on the Property Ladder?

Friday, 17 January 2014

First-time buyers are boosting a UK housing market that has seen the fastest price rises since 2007. The Council of Mortgage Lenders' annual figures to October 2013 show 28% more loans to first-timers, and a 48% increase in their value. Repayments are also up, as homeowners take advantage of low interest rates to pay off their mortgages faster.

The government's Help to Buy scheme has encouraged lenders made wary by the financial crisis to lend to first-time buyers with smaller deposits. Here's how it works:

Help to Buy 1, only available for new-builds, lends the first-time buyer 20% of the property's value. The loan is interest-free for five years, then interest is charged at around 1.75% from year six onward. You pay off the remainder when you sell the property or finish paying off your mortgage, whichever happens first. Most lenders participate as it means they only have to lend 75% to accept a 5% deposit.

Help to Buy 2 is also available to existing owners and for older properties. Lenders providing a 95% mortgage can buy a government guarantee securing 15% of the property's value. Although most major lenders are on board, it's a little more divisive: some fear it could overheat the market, particularly in London and the South East, where demand is always higher.

As Help to Buy seems to have already given the market a much-needed kick, buyers may not need to sign up for the scheme to reap the benefits. Several lenders are again offering 95% mortgages outside Help to Buy, and generally at more appealing rates.

With the market on the up again and low interest rates sweetening the deal, 2014 might be year for first-time buyers to seize the opportunity - and get searching for home insurance quotes!


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