London 'Help to Buy' scheme: what you need to know about the new options for first-time buyers
Chancellor George Osborne has recognised the limitations of the Help to Buy scheme in the capital, by announcing a new London Help to Buy scheme as part of the Autumn Spending Review.
The current scheme offers London's first-time buyers loans of up to 20 per cent of the property value. The reviewed arrangement will offer 40 per cent Government-backed loans.
Buyers will still have to muster a five per cent deposit. The remaining 55 per cent will need to come from a bank or building society mortgage.
Osborne has changed the Help to Buy scheme as only 3,128 Londoners have used it to get onto the housing ladder – a rate of less than 30 sales per week - since the scheme launched in April 2013.
However, Susan Emmett, research director at Savills, warned young buyers to think hard about the risks of taking on huge debts – a mortgage plus a Government loan.
“With the average cost of a home in London at about £500,000, a 40 per cent equity loan represents a debt of £200,000 which accrues interest costs after five years in addition to servicing a mortgage of up to £275,000,” she said. “And buyers will still need to find a deposit of at least £25,000.”
Five help-to-buy London homes from £306,000
London Help to Buy in numbers:
- The average cost of a first-time buy in London is currently around £350,000.
- This will mean finding a five per cent deposit of £17,500.
- The Government will provide 40 per cent of the price, or £140,000.
- First-time buyers will therefore need a £192,500 mortgage.
- To raise this sum, assuming they are able to borrow four times their annual salary, they will need a salary of £48,125 to make London Help to Buy work for them.
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