The government’s Help to Buy scheme is now the most popular way for first-time buyers to get onto the housing ladder, research by mortgage and loans provider Ocean Finance has revealed.
From a survey of 628 respondents, half of first-time buyers said they would use the Help to Buy equity loan or mortgage guarantee schemes to overcome the barrier of having a large deposit, with 40 per cent stating that a deposit remains the biggest hurdle to getting on the housing ladder.
In 2013 the government launched the Help to Buy scheme in an attempt to kick-start the housing market following the financial crisis, which saw lenders tighten their mortgage lending rules and most 95 per cent mortgages disappear.
The result was that borrowers needed to find deposits of at least 10 per cent and often up to 25 per cent, which took home-ownership out of the hands of many first-time buyers. Rising house prices have also made it harder to fulfil tough affordability checks and at the same time, push the amount needed for a deposit even higher.
Ocean Finance’s research found that 22 per cent plan to boost savings with a Help to Buy Isa, announced in the Budget and set to launch in the autumn, while 14 per cent expect to borrow from their families.
The Help to Buy Isa is aimed at boosting the savings of first-time buyers with a top-up for the government of 25 per cent, up to a maximum of £3,000 on savings of £12,000.
Gareth Shilton, Ocean’s spokesperson, said: “Too many first-time buyers have been frozen out of the housing market because they couldn’t save the 25 per cent needed to get the best deals and make their mortgage affordable.
“The big question, of course, is what will happen when the government steps back from supporting schemes to get the housing market moving. Housebuilders and lenders need to be having conversations to see how they can work together to ensure the momentum isn’t lost.”
ruth.gillbe@ft.com
