‘Save to buy’ scheme looks to fill the shoes of Help to Buy

The scheme is to be launched on a small scale initially and will be offered for use on a development of one, two and three bed apartments in Epping, Essex with a second development in London to follow later this year.

Speaking to FTAdviser, Fairview sales and marketing director Christopher Hood explained that the idea for the scheme came from the end of the government’s Help to Buy scheme and out of an understanding of the struggle first time buyers are currently faced with when saving for a mortgage deposit.

Fairview conducted a survey of first time buyers to find out what their biggest obstacles were to homeownership, with the results showing that building a deposit while also renting was the biggest barrier.

Based on this, Hood wanted to build a scheme that would help first time buyers shorten the mortgage deposit saving process, and from this ‘save to buy’ was created. 

Properties in the scheme - all new builds - range from £330,000 to £500,000 and the buyer only needs to show that they have 1 per cent of the deposit saved currently to qualify.

They will then be approved for the scheme by a financial adviser from advice firm Torc24, who will decide on suitability and recommend the monthly payments - 100 per cent of which are used towards the mortgage deposit.

We look at it as a scheme that is needed at this moment in time due to the cost-of-living crisis and inflationChristopher Hood, Fairview

The fixed monthly payments will be based on average monthly rent in the area along with individual affordability. 

For example, someone who is £9,000 short of a deposit could pay £1,500 a month for six months and then progress with the mortgage application process - which does not have to be completed with Torc24.

“The main beneficiary of this scheme is the customer. We're giving the breathing space to save up money within a six month period, nine months or 12 months, that would otherwise take five years,” Hood explained.

Commenting on the scheme, some mortgage advisers were sceptical as it is not widely available on the market.

Hood acknowledged this and said: “I have quite a lot of communications in the industry, and nobody has come up with anything like this. Probably the reason why is because there's actually no real benefit for us until you move in and buy the property.”

He continued: “We've prioritised the first-time-buyer market for a long time. We like to call ourselves the first-time-buyer developer of choice, because the majority of the people that we sell to are first-time-buyers. 

“So we look at it as a scheme that is needed at this moment in time due to the cost-of-living crisis and inflation - it’s a scheme that can generally help people.”

London Money director, Martin Stewart dubbed the scheme an interesting one but said its existence “possibly suggests that the new build market is going to see transactions coming under pressure due to the removal of Help to Buy and the underlying market conditions".

Stewart noted that issues may arise when you allow people to "try before they buy" and said the “devil will be in the detail”.

“I normally revert to my standard position, if you can’t buy a house through normal channels, wait until you can,” Stewart added.

Others were more positive. Brian Byrnes, head of personal finance at the savings, investing and mortgage brokerage app Moneybox said innovations like this are welcome in the market.

“Saving for a mortgage while renting can be extremely challenging especially as rents are rising rapidly in London and surrounding areas,” Byrnes said.

“Like all innovations, the proof will be in the pudding. Will borrowers be able to access competitive mortgage interest rates and what happens if the circumstances of a potential buyer changes while they are saving for their deposit? These details will be important but for now I think aspiring homeowners will welcome this market innovation."

Fairview explained that the buyer can exit the agreement before the mortgage approval stage and receive their initial 1 per cent deposit back.

In this case, the fixed monthly payments would be kept by Fairview as compensation for the buyer’s occupation of the property.

The developer also highlighted that the price of the property is agreed at the start of the agreement and will be fixed for the duration so will not fluctuate with market volatility.

“We have to remember that the market is cyclical in nature, and it's always changing,” Hood said.

“A lot of the time, predictions from last year or the year before were incorrect, you never actually know what the market is going to do until you're in it.

"What we're trying to do with this scheme is deliver some certainty over a shorter period of time so people are less exposed to the elements they will face if renting a property over a five year period.”

jane.matthews@ft.com