Chancellor Extends Home-Buying Schemes

Chancellor George Osborne has announced new plans to help people to buy their own homes.

The Help to Buy scheme expands a previous scheme, FirstBuy, which was aimed solely at first-time buyers.  It enables all purchasers to put down a 5% deposit on a newly built home, much less than some banks now demand.

Up to 20% of the cost of the home will be funded by a shared equity loan, which will be interest-free for the first five years.  This will in effect see the government taking a stake in the value of borrowers’ homes. It plans to invest £3.5bn in these loans.

The value of the shared equity loan is linked to the property’s value. So, for example, if the value the property has doubled by the time the shared equity loan is repaid, the amount the borrower has to repay will have doubled, too.

In year six, borrowers will have to pay a 1.75% annual fee, which will rise by 1% above the Retail Prices Index (RPI) measure of inflation every year after that.  The remainder of the value of the property is paid for with a standard mortgage, to cover up to 75% of the loan.

Whereas the previous scheme FirstBuy was only open to first-time buyers, this one will be available to all buyers of newly built homes. Previously there was also an income limit of £60,000 a year, but this will no longer apply.

It will cover newly built homes up to the value of £600,000 and borrowers will be able to apply from 1 April 2013.