Since house prices spiked between 2002 and 2007, home-ownership has been a mere pipedream for many – with property prices placing even starter homes out of reach. However, in a further twist of the knife, the recession and banking crisis that followed meant that financial institutions were now demanding higher than ever deposits, moving the goalposts for those who have been saving to finally get onto the property ladder.
Further complicating matters for hopeful buyers is the fact that lenders are now extremely cautious of lending to anyone with a less than spotless credit history. In a time when financial instability has meant that many have struggled to keep up with bill or credit repayments, this has further discounted all but the most conscientious potential homeowners.
With much fanfare, the help to buy scheme was announced during the 2013 budget. Feted as a way to help buyers get on, or even move up, the property ladder, this new government scheme would mean initially that interest free equity loans would be given on new build homes. This, together with a buyer’s five per cent deposit, would take the deposit amount to the 25 per cent typically needed by lenders.
In 2014 the plans are to take this further – opening the scheme up to existing re-sale properties, rather than limiting buyers to new builds only.
While this does offer hope to many despondent renters – or those still living with patient parents – it’s a far from foolproof plan. For starters, there’s still the matter of the five per cent deposit. When you consider that, on a £150,000 starter home, this amounts to £7,500, it’s easy to see why it will still take a considerable time to save up for someone already struggling with high rents and the ever increasing cost of living.
Secondly, there’s still the issue of lender trust. While those with higher deposits are likely to be considered with more leniency when it comes to credit scores, exactly how lenders will assess those using the help to buy scheme is unclear. If help to buy is something that you are considering, it would certainly be wise to get your free credit score online, so that you’re aware of any potential issues before you begin the application process. You can quickly and easily get a Credit Expert free credit score online – simply cancel before the end of the 30 day trial and you can access your credit history without it costing you a penny.
Another issue that is causing furious debate at the moment is the fact that the help to buy scheme could actually hinder first time buyers in the long run, by further artificially inflating house prices and keeping them out of reach to the average Joe.
Putting the concerns to one side, there’s no doubt that the help to buy scheme offers a way for fed-up renters to finally get a foot on the property ladder. It’s a tempting offer for those who’ve dreamt of homeownership for years, but the advice is clear – consider your individual pros and cons carefully, to make sure that this scheme is right for you, before you take the plunge.