/ Money

Can the Help to Buy scheme really help me to buy?

Fingers on sketch of home

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.


I was also quite excited about this measure when it was announced in the Budget, but I don’t think I’ll be able to use it. I’d be quite happy to buy a new-build home, but any new builds in my area are very expensive indeed. The mortgage repayments would be rather scary!

I was listening to the budget announcements and had the same thoughts – help to get people on the housing ladder would be really welcome. But I’m also disappointed that one of the schemes only applies to new build properties.

I know some people prefer new builds, as they can move straight in without having to worry about things like replacing old boilers or doing any home improvements, but the fact is that most new build properties I’ve seen (I’m in London, so it might be different elsewhere in the country) are incredibly small. They usually come with a tiny kitchen/lounge (billed as ‘open plan’ rather than the ‘space-saving’ measure it actually is), and are often just small box-rooms with no character.

I was lucky enough to be one of the last people to get on the OwnHome scheme years ago. It was a genuinely fantastic scheme to get people on the housing ladder – providing similar measures to the first option mentioned in the budget (i.e. a loan that acts as a deposit, which is paid off at a nominal interest rate or when you sell the house). The crucial thing with it, though, was that you could use it to buy older properties too, meaning that I could actually afford to take up the offer rather than pay an inflated price for a new build property that was much smaller than any of the older places I could have moved into. Although I’m sure there were reasons why funding for this scheme was dropped, it was so popular and helped so many people that I would love to see it brought back.

Whilst help for would be buyers is to be welcomed I too have reservations about this scheme.

It should be limited to first time buyers. As it stands it’s a way for would be second home buyers or perhaps even buy to let types to cash in.

It should be limited to less than half the £600k level I understand it’s been set at. Not many first time buyers qualifying for that kind of property, even in London.

It should not be limited to new builds. Although new builds are good on energy efficiency they tend to be small, postage stamp gardens and as a result built to very high density levels. That’s ok for some but a scheme like this will, through greater demand, promote higher prices compared to existing properties, and they just aren’t worth it.

I see no reason whatsoever why the hard pressed UK tax payer should fund people to buy houses. Certainly not anything like the £600k level proposed. I could not even ever dream of thinking about a dwelling of that cost, it is rediculous. This is a charter for get rich quick oppertunists to make money, it will do little to help the homeless.

babymem says:
14 June 2013

I don’t think the scheme really works. I have been a Tenant for 25 years(max discount). BUT! I live in the barbican London and my two bedroom is value at 330.000 with a discount of 100.000 so I would pay 230.00 lol I am a security guard at Fenchurch st and earn 35.000 a year and still can’t afford to buy it. They should allow you to buy a property of your choice anywhere even from Auctions (as the council can’t lose) and out of London where prices are cheaper. I’m having to put my self in the swap book to move to purfleet in Essex as property is cheaper there and I would only need one train to work which goes straight to Fenchurch Station. I am not interested in share ownerships. Does anyone know a better way to buy. I have at the moment decided to save (which I can afford) to put 1,000 a month away and live comfortable, that would make 12,000 in one year and after 6 years 70,000 plus 2 x isa accounts at 15,000 total 85,000 Appox. what happens now. well go to Auction buy for 60,000 max spend 10,000 on renovations wait another 5 to 8 years and the property market back to booming. by now (god willing) 62 years of age. property value in region of 120,00 up to 200,000. Sell, buy small and retirement money till you died plus the joker government pension too. lol I reat my case