Yesterday, the UK government officially launched Help to Buy London, a version of the national mortgage scheme designed to assist buyers in the capital’s more expensive market. But will it actually help anyone?
The scheme allows buyers to get mortgages at a more affordable rate by offering an equity loan of up to 40 per cent of a property’s value – double the 20 per cent currently offered across the rest of the UK’s Help to Buy package. Buyers only require a deposit of 5 per cent and can then take out a mortgage on the remaining property price at a rate as low as 1.55 per cent. (You can read a full explanation of the scheme here.)
Is anyone actually eligible for the scheme, though?
Help to Buy London is available for any home up to a maximum of £600,000. According to the ONS, the average London house price has risen 9.8 per cent in the year to November to reach an average of £537,000, just within the eligibility bracket.
According to Zoople, the average London home currently osts £637,298, more than double the price for property across the UK as a whole.
For a buyer to purchase a home at that price, they would need a 5 per cent deposit of £30,000 and a mortgage to cover at least £330,000 of the price. With lenders able to advance 4.5 times a buyer’s salary through the scheme, an applicant would require a salary of £73,000. The average salary in the capital, though, is £35,000.
Even for a house worth £350,000, buyers would need an above-average salary of £43,000.
Lawrence Hall of Zoopla comments: “The extension of the Help to Buy scheme in London is certainly a positive step, and may just give ‘generation rent’ a better chance at getting a foot onto the property ladder. However, buyers will have to look hard for an affordable home.”
The calculations following ongoing concerns surrounding the impact of Help to Buy on the housing market, as the stimulating of demand in the face of a supply shortage continues to push up prices.Google+