The UK Government’s Help to Buy Equity Loan scheme has grown in popularity since it was first launched in 2013. The year 2018 proved it’s best yet, with a total of 52,057 new homes – an average of 1,000 homes per week - bought by Britons using the option.
Help to Buy Equity Loan was introduced six years ago by the Government to make buying a home more affordable, to stimulate the new build home industry and also the broader housing market. It appears to have worked and a total of 210,964 newly built homes have been constructed and purchased through the scheme.
Help to Buy Equity Loan explained
The Help to Buy Equity Loan scheme works as follows:
A home-buyer needs to save up a 5% deposit for a newly built home and be able to afford a 75% mortgage for it. The remaining 20% of the value of the home is covered by an equity loan provided by the Government. No fees are charged on that 20% loan for the first five years after you buy the property.
Then, when you sell your property, you must pay the Government 20% of the value the property is sold for; if your home is sold for more than you paid for it, you must pay the Government back 20% of that value. However, if you lose money on your home, so does the Government.
The Help to Buy Equity Loan was amended a little in 2016, where the loan proportion for London properties was increased from 20% to 40%, reflecting the higher cost of a home in the English capital.
Help to Buy Equity Loan is set to end in 2023, but it isn’t the Government’s only scheme to help people in the UK, particularly first-time buyers, grab a rung on the property ladder. The Help to Buy ISA and Lifetime ISA, or LISA are also options for would-be home-buyers to use to buy a home that might otherwise be out of reach.
Government lends £11.71 billion through scheme
The latest data on the Help to Buy Equity Loan scheme, meanwhile, also shows the Government has lent a total of £11.71 billion to home-buyers of newly built homes since it began in 2013. The median average loan from the Government to Help to Buy recipients was £46,500.
Meanwhile, the median average price per property bought through the scheme is £234,995. In London, the median average price of a newly-built home bought through Help to buy was £415,000.
Other details from the report showed that semi-detached houses were the most popular type of home bought through the scheme. Although, detached homes were the second most popular purchase, with numbers not too far behind semi-detached.
In addition, while 57% of home buyers using the scheme put down a 5% deposit, 22% of buyers had a deposit of between 5 and 10%, while 21% had a deposit of 10% or more.
The figures highlight that Help to Buy Equity Loan may have been a bit of a slow burner, but now, more home-buyers are making use of the scheme to buy a brand-new home of their own. Just how the new build market will fair once the scheme ends in 2023, however, remains a big unknown.