More help coming for first time buyers and low-income savers

It is estimated that 20,000 people have benefited since the Help to Buy Scheme was first launched five years ago to help first time buyers purchase a newly-built home.

A new scheme will be launched from January 2018 in the form of the Starter Home Scheme, which will give first time buyers aged 23-40 a discount of 20% of the asking price of a home in the scheme.

First time buyers have an array of schemes designed to help them get on the property ladder.

Help to Buy Equity Loan (England)

The buyer contributes a minimum deposit of 5% of the property’s value. The government provides an interest-free loan of 20% and the remaining 75% is covered by a standard mortgage (up to 40% government loan and 55% mortgage for buyers in London).

Help to Buy ISA

The government adds £25 for each £100 saved by first time buyers, up to a maximum of £3,000 on £12,000 savings. If buying with another person, both can have a Help to Buy ISA.

Lifetime ISA

Savers aged 18-40 can invest up to 4,000 per year until the age of 50. The government then increases the investment by 25p for each £1 saved, up to £1,000 per year. There is no withdrawal charge for home buyers to buy their first home.

Shared Ownership

The buyer purchases between 25-75% of their home from a local housing association and pay an affordable rent on the part they don’t own.

Right to Buy

Council tenants with a minimum of three consecutive years tenancy can potentially buy their home at a discount of up to £78,600 (£104,900 in London).

Starter Home Scheme (from 2018)

The government has provided funding to 30 local authorities to provide 200,000 new homes for first time buyers aged between 23 and 40. Buyers will receive at least 20% discount off the asking price of a home in this scheme.

Help to Save Scheme (from 2018)

A government scheme aimed at encouraging people on low incomes to save will begin trials in January and be introduced in stages by October. The government will pay a 50% top up to those receiving working tax credits and some on Universal Credit. The scheme is limited to £50 savings per month and is worth up to £1,200 on £2,400 savings over a four year period.

Help to Pay

Meanwhile, much of the help available for homeowners in mortgage arrears or in danger of repossession is being withdrawn. Various schemes have been available to help owners claiming certain benefits, including one for low income families to help them meet interest payments. In 2018, this scheme will be replaced with a loan. Borrowers and lenders will be expected to come to an arrangement instead.

Stricter Regulations on Lending

A combination of low interest rates and less aggressive lenders has meant fewer people have lost their homes through repossession in recent years. Last year, fewer homes were repossessed than at any time since 1982.

With stricter regulations in place, lenders now have more safeguards, and mortgage applicants will also now have to prove that they have a buffer to deal with money shocks and rising interest rates, although this would not protect homeowners suffering a sudden drop in income.


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