Help to Buy Scheme: The Government Offers Incentive for First Time Buyers

LONDON, July 3, 2013 /PRNewswire/ --

The long-term problems in the housing market are getting an impressive helping hand from the government in the form of the new Help to Buy scheme introduced by Chancellor George Osborne in this year's budget. This is good news for prospective buyers who want to get on the housing ladder and also for those who want to move to a larger property. As house prices are also beginning to rise, there is increased optimism about the possibility of selling property at a reasonable price and being able to afford to move up.

What Help to Buy offers

The aim of Help to Buy is to increase the supply of housing and of mortgages requiring a low deposit. The first stage, which came into effect on 1^st April 2013, allows buyers aiming to purchase a newbuild home to pay a deposit of just five per cent. The government will then lend buyers up to 20 per cent of the value of their new home via an equity loan, so that the mortgage requirement is just 75 per cent. The loan is interest-free for the first five years, and then a fee is charged at 1.75 per cent per annum. This fee will rise annually by the rate of RPI (retail price index) inflation plus one per cent.

The second stage will come into effect on 1^st January 2014 and is a mortgage guarantee scheme. This provides incentives to lenders to encourage them to make more mortgages available for people who only have access to a small deposit. Both stages of the scheme can apply to either newbuild or existing property valued at up to £600,000.

Is it working?

Introduced on 1st April, already industry figures indicate that the Help to Buy scheme has successfully beaten forecasts for the first two months. The Home Builders Federation (HBF) has reported a great deal of interest as more than 500 buyers apply via the scheme every week - in all 4,000 people have now reserved a new home using Help to Buy. At the same time, mortgage lender Halifax reported that during May UK house prices rose by 0.4 per cent, indicating an annual growth rate that is the highest it has been since autumn 2010, and 2.7 per cent higher than the same time last year.

Better business all round

The rise in house prices and the government's action to make it easier to afford a mortgage have had a positive effect on the stock market and Bloomberg Businessweek reports that by the morning of Friday 14th June the FTSE 100 index had risen by 32.83 points - about half of one per cent - to 6337.46. This was the second consecutive day in which UK stocks climbed.

The construction industry is also benefiting from the new Help to Buy scheme, which is boosting demand - the Guardian reports that output rose in the sector for the first time since last October, according to the Markit/CIPS UK construction PMI. During May a survey by Markit found that residential building work increased faster than it had done since 2011. Reports from homebuilders such as Bovis Homes and Barratt Developments confirm an increase in trade.  

As the Help to Buy scheme applies to both first time buyers and existing homeowners it is set to provide a major boost for all stakeholders in the property market, including estate agents, providers of storage solutions and removal firms.

Surrey is ahead of the trend

When it comes to home removals Surrey properties are already being sold faster than at this time last year. In fact, Surrey homes are very much in demand. Analysts who monitor the housing market have detected some significant changes during the 12 months to June 2013 in Surrey, where the length of time homes are on the market has reduced for every single type of property available. As properties move faster, some by as much as 10 per cent compared to last year, storage and removal companies are much in demand to facilitate the process of moving house.

Steve Baran, of Barans Removals Ltd. in Surrey, a company awarded the coveted Remover of the Year Award by the National Guild of Removers and Storers (NGRS) recently commented on the prospects for 2013: "We are very much looking forward to a busy year in 2013, moving clients anywhere in the UK and Europe. As the Help to Buy scheme begins to affect more and more people we fully expect West London, Middlesex, Guildford, as well as Surrey to become hotspots for home removals."

SOURCE OWL