Not many people can say they’ve swooned at the Chancellor, but that’s the feeling I had when he announced the two new measures under the Help to Buy mortgage scheme in his Budget speech last month.
As someone who’s been saving for a few years to get on the property ladder, but is still nowhere near having a large enough deposit, the Help to Buy scheme sounds like the stroke of good fortune I’ve been looking for. Or is it?
The first measure is an equity loan from the government. If I put in a 5% deposit, the government lends me 20% and a lender provides the rest. The loan from the government is interest-free for the first five years, then 1.75% and upwards thereafter.
New build? No thanks
But I have a number of reservations with this. Firstly, it’s only available on new-build properties. I’ve lost count of how many new-build initiatives there have been over the past few years (NewBuy was the last), and each has failed to be a real success.
New-build properties have a poor track record for house price growth, come with a hefty premium on purchase, and, quite frankly, are not what I had in mind for my first home. If I wanted to live in a white cube, I’d squat in an Anthony Gormley exhibition.
Nudging the lenders
The second measure is a little more complex. Under the government’s mortgage guarantee scheme, I would still have to find 5% towards a home – a lender will provide 80% and the government will guarantee the remaining 15% for the lender to give me. The mortgage guarantee would give me the freedom of buying whatever house I wanted, new or old. But while it gives me the leg-up I need, there are no guarantees on the interest rate I’ll be offered by the lender.
Under the recent Funding for Lending scheme, banks have been slow to pass on the benefits of cheap money to people with smaller deposits and less equity. I’m sceptical as to whether they’ll really treat me like an 80% loan-to-value customer with the mortgage guarantee.
Perhaps my sudden affection for the Chancellor was a rush of blood to the head. I’ve still to decide whether our mortgage flirtation will blossom into the long-term relationship I’ve been looking for.