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Will help to buy help?

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This was first published in the Wigan Observer on the 29th October 2013

The second phase of the Government’s Help to Buy scheme launched this month. It’s been brought in three months earlier than previously planned and is aimed at speeding up the property market for current home owners in older properties, not just first time buyers, which the emphasis has consistently been on.

Help to Buy is essentially a mortgage guarantee scheme, which will allow borrowers with a 5 per cent deposit to buy a property worth up to £600,000 according to their affordability. The Government will guarantee up to 15 per cent of the loan for seven years to allow the borrower to gain access to cheaper mortgage deal, by effectively having a 20 per cent deposit. That guarantee can be called in if the borrower defaults on their mortgage.

The pot of £12billion worth of guarantees has been set aside and will be available for the next three years for use by homebuyers but if many people rush to take up the offer, the money could run out sooner.

Many are sceptical about these schemes which make grand promises to help inject new life into the housing market. While it may not be the complete answer – we need more new and affordable homes, more land to build on, more affordable lending – the expansion of Help to Buy is sure to help a large number of people move into their first home and those moving up the ladder will be able to do so more quickly, even those in negative equity.

For those moving up the ladder, the fact that more people will be able to gain access to mortgages, will stimulate the market and get things moving. House prices are on the up too and with the arrival of Help to Buy, this should continue. Likewise, the market generally takes a downturn towards the end of the year, as homebuyers tend to put off plans to move until the New Year. Again Help to Buy opening up could make the market more buoyant as we get closer to the end of the year.

Many lenders have already announced that they’re participating in the second stage of Help to Buy including RBS and Lloyds Banking Group, Virgin Money, Barclays and Santander. More lenders will no doubt add their support as the scheme gets further underway.

For now buyers wanting to make use of the Help to Buy scheme should contact an independent financial advisor for advice on the most appropriate provider to opt for.