Property News

First Time Buyers Make Up Majority of Help to Buy Purchasers

Em Morley - December 3, 2018

Statistics from the Government’s Help to Buy (Equity Loan scheme) Data to 30th June 2018, England document has revealed a 15% year-on-year increase in the number of those in England using the scheme.

The document highlights that since the scheme was launched (1st April 2013) to 30th June 2018, 183,947 properties have been purchased with an equity loan. The total value of these loans is £9.90 billion, with the value of the properties sold under the scheme amounting to £46.52 billion.

The Government has also pointed out that 81% of the total purchases were made by first time buyers. In London, the maximum equity loan was increased from 20% to 40% from February 2016. Since that time to 30th June 2018, there have been 9,470 completions in London, and 7,885 of which were made with an equity loan higher than 20%.

Lucy Pendleton, founder director of independent estate agents James Pendleton, has commented: “Those looking for some clues as to what is propping up house prices across the country need look no further. First time buyers are piling into Help to Buy and they don’t seem to give two hoots about the Brexit uncertainty that is holding back the rest of the market.

“First-time buyers, still under huge financial pressure despite relatively low borrowing rates, still account for the lion’s share of these loans and their appetite isn’t waning. They have taken 16% more Help to Buy loans nationally in the past year and in London they are literally hoovering them up.

“It’s here they are putting the scheme to particularly good use because house prices are still relatively high despite the fact they are cooling. That’s not that surprising but the scale of the increase certainly is, with first time buyers’ use of the scheme ballooning a massive 32% in the capital.

“Transaction levels nationally remain depressed but hunger for Help to Buy shows no sign of abating with the scheme helping first time buyers buy £5.8 billion worth of property in the first half of 2018.”

Shaun Church, Director at Private Finance, has said: “The Help to Buy scheme has undoubtedly been a much-needed helping hand for many first time buyers struggling with high housing costs. Approvals have continued to grow year-on-year, suggesting there is still strong demand for options onto the housing ladder, which don’t require a hefty deposit.

“Londoners have strongly benefited from the maximum equity loan doubling in size, with 83% of all completions using the scheme in the capital being made with a loan of more than 20% in Q2. This is some compensation for the fact that Londoners do not stand to benefit as much from recent cuts to stamp duty for first-time buyers, given only properties under £300,000 are fully exempt.

“Though Help to Buy is a valuable route to homeownership, where possible it is best to exit the scheme once the five-year interest-free grace period is over or sooner if this is viable. As Help to Buy caters to a more niche market, the rates available on more traditional mortgage products are generally more competitive. Help to Buy borrowers are also expected to pay 10-20% back of the current value of their home rather than the original equity loan, so exiting the scheme enables them to enjoy more of the capital gains from their property should their home rise in value.”

Craig Hall, Head of Broker Relationships and Propositions, Legal & General Mortgage Club, has commented: “With its largest quarter to date, today’s figures show the vital role Help to Buy continues to play in the market.

“Not only has the scheme enabled builders to deliver more homes, with an increased supply of 78% in the last five years, but it is consistently supporting the buyers who need it most – 81% of those who use it are first time buyers.

“Given the quarter on quarter increases we have been seeing, it is likely we have reached the 200,000 mark by now.  It’s good news that the scheme has now been extended beyond 2021, however, we still need to look at what will happen post 2023.

“Whether it’s through an increase uptake of Shared Ownership, lenders offering higher loan-to-values (LTVs), Starter Homes, the Bank of Mum and Dad or intergenerational mortgages, we need to focus our attention on what the plan for the future is now if we are to prepare for the scheme’s end.”