What does the new Budget mean for the mortgage market?
The property ladder has become an unattainable aspiration in recent
years for those trying to build up savings to afford the demand for large
deposits; however, new plans within the budget are offering an avenue into home
ownership making it a real possibility for many.
So what exactly does the new budget propose?
The budget outlines a multi-billion pound scheme which seeks to
improve first-time home ownership prospects through low-deposit mortgages, and
to encourage an increase in new housing. This new initiative has been termed Help to Buy.
Help to Buy is made up of two separate schemes; the first an equity
loan and the second a mortgage guarantee.
Equity Loan
The equity loan scheme, which will be implemented on the 1st
of April 2013, allows both first-time buyers and existing homeowners to
purchase a new build property worth up to £600,000. The first five years of the
20% equity loan are interest free.
To acquire this loan you will need:
·
A deposit
of at least 5%
·
The
remaining 75% borrowed from a mortgage lender
Research has estimated that these equity loans could potentially
support 75,000 sales of new homes over the course of the next three years
(Savills research).
Mortgage Guarantee
This scheme doesn't begin until January 2014. Like the equity loan,
the mortgage guarantee scheme is available to existing homeowners and
first-time buyers who with this can purchase a home worth up to £600,000 (both
new build properties and existing homes).
The plan with this particular scheme is to create an incentive for
lenders to provide more mortgages with low deposits by giving them a guarantee
of a percentage of your loan.
It is estimated that the mortgage guarantee scheme could enable around
“550,000 extra house sales over the next three years if it translates in to
£130 billion of mortgage lending” (Savills research).
Would you like to find out
if you can become one of these many new home owners? I can provide you with
specialist financial advice on the best mortgage option for you.
Daniel Bailey
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