Home ownership is one of the most cherished dreams of an average Briton. But with high property prices and tough loan requirements, it remains a pipe dream for many. In fact, a study by the Office for National Statistics revealed falling home ownership rates in the past decade, for the first time in almost a century.
But all that is changing with the government stepping in with its ‘Help to Buy’ scheme to help citizens realise their dream of homeownership. Help to Buy is a government backed initiative to help people buy a home. The scheme was initially launched in April to provide a 20% equity loan from the government. The second phase launched in October requires homebuyers to provide only a small deposit to the lender, with the government offering a guarantee of 15% of the loan, in order to encourage the lender to provide higher loan amounts.
The scheme will be of great help for first-time homebuyers or movers who want to buy new or old homes which are valued up to £600,000. A buyer looking to buy a home of £200,000 will have to put down a deposit of only £10,000. Many homebuyers have been unable to realise their dream of buying a home so far because of the substantial down payments, up to even 20% of the home value. With the new scheme, a large number of young Brits will now be able to undergo the rite of passage of owning a home.
Many lendershave expressed keen interest in becoming part of the second phase of the scheme. The Royal Bank of Scotland and Halifax are already offering products based on the scheme. Lenders such as Aldermore Bank and Virgin Money are expected to join by January 2014.
Prime Minister David Cameron announced that the scheme is intended to help thousands of people get a foot on the housing ladder. With the buyer bringing just 5% of the property price for a deposit, the government provides a guarantee to the banks for up to 15%to help themprovide higher mortgage to aspiring home owners. Interest rates on these loans are expected to become more competitive by Spring, as more lenders join in.
If you are an aspiring homebuyer who has been unable to afford a new home because of the hefty down payment requirements so far, this may be the best time for you to finally make your dreams come true.
Photo courtesy: Sean