For sale signs Ashley TerraceHelp to Buy

Help to Buy was launched by the government in April 2013 to support and drive purchases of New Build Homes. The main aim of it is to improve the access to and affordability of mortgages - specifically for those people who cannot afford a large deposit.

The scheme will guarantee mortgages on properties worth up to £600,000. However, borrowers will come under 'stress testing' before they can purchase a home.

The Government will lend you up to 20% of the value of your new property through an equity loan, which will be interest-free for the first five years and can be repaid at any time or on the sale of your home. Customers will only need a minimum 5% deposit to qualify for the scheme. Help to Buy is available to all purchasers, not just first-time buyers.

Chancellor George Osborne said: "The mortgage guarantee will support an increase in high loan-to-value mortgages for people who can't afford large deposits, and it will also boost housebuilding.
"Our goal is very simple. We want to help people who aspire to buy their own home, who can afford to do so but for whom the mortgage market is not working,"

The guarantee scheme will run for three years and will see the government guarantee 15% of the value of loans provided by lenders.

'Stress Testing'

The government have assured sceptics that measures will be taken to ensure borrowers do not overburden themselves. These include the introduction of strict income checks and stress-testing to make sure people can afford their loan.

The Treasury said borrowers would not be able to access guaranteed mortgages 'if their credit history doesn't meet Financial Conduct Authority impaired credit standards, including have a county court judgement over £500 in the past three years'.

Members of the scheme will also have to sign a declaration confirming that they are not purchasing a second home.

'People will not be able to use the mortgage guarantee scheme to buy second homes, with lenders required to collect a declaration stating that the borrower has no interest in a property anywhere else in the world.'

A Successful Case Study

More than a quarter of demand for homes under the Help to Buy scheme has been in the West Midlands. The area has accounted for 1,873 out of 6,899 reservations across England. Help to Buy has opened up the lower end of the market in the region, where people most struggle to raise deposits.

Yet the scheme has a broader appeal, according to one local Help to Buy agent. "It is not a particular income bracket or type of person. It is families, it is single people, it is couples; people on lower incomes, people on higher incomes." While perhaps first-time buyers are benefiting most from the scheme, it seems that existing homeowners are using the financial help as an opportunity to become more mobile.
(Help to Buy will be available in England only. The Welsh and Scottish governments and the Northern Ireland Assembly will have funding for similar schemes.)