LEGAL CORNER: Help to Buy is ending, but there's still hope
The UK housing market has remained resilient and house prices continue to rise, so it is perhaps not surprising to hear so many people are struggling to step onto the first rung of the property ladder.
Even the uncertainty surrounding Britain’s Brexit seems to have done little to destabilise the domestic property market.
David Cameron’s government promised to help, with a pledge to ‘turn generation rent into generation buy’ by building more affordable homes and introducing a Help to Buy scheme. Designed to enable buyers with small deposits to obtain mortgage lending, this government scheme was criticised because it prevents borrowers from getting their hands on the ‘bonus’ payment until their sale is completed, leaving the buyer with the substantial task of self-funding their deposit. Theresa May’s government has now confirmed the Help to Buy mortgage guarantee scheme will close at the end of this year.
But as one door closes... next year sees the launch of a Lifetime Individual Savings Account (ISA) enabling individuals to save up to £4,000 a year. Under the scheme, the government will pay you a 25 per cent ‘bonus’ and, provided you hold the ISA for a minimum of 12 months, you can put the ISA towards a deposit on your first home. Savers must be between 18 and 39 to qualify for a Lifetime ISA and, once opened, your savings scheme can continue until you reach the age of 50.
The aim? To help first-time buyers purchase property worth up to £450,000, a substantially higher offer than the Help to Buy limit of £250,000.
Outside the scheme, some buyers may be in a position to borrow directly from family members whose savings are otherwise earning little or no interest in these days of rock-bottom interest rates. The good news here is that mortgage lenders are increasingly recognising this market niche by designing products aimed at parents and grandparents who are unable simply to hand over a deposit lump sum.
Mortgage companies now offer more incentives aimed at the first-time buyer, including five per cent deposits and cash-back at completion and many of the most popular mortgage deals sit outside existing Help to Buy arrangements.
Only time will tell whether the new Lifetime ISA will provide a crucial stepping stone for first-time buyers, or whether mortgage lenders will instead take it upon themselves to provide much-needed assistance.
Residential Conveyancing department
George Ide, LLP
Solicitors of Chichester and Bognor Regis