Housing Market makes a move for the positive

Housing Market makes a move for the positive

Buying a house used to be so simple. You would visit your local bank or building society, they would work out how much you could afford to pay based on your salary and you would be offered an appropriate mortgage. Then the market seemed to explode and mortgages were being offered to people who clearly couldn’t make the repayments. Deposits were waived in favour of 100% mortgages and as the demand for homes rocketed, house prices started to climb astronomically. The credit crunch of 2008 came about initially because people were unable to afford their mortgages and since then the whole industry has been far more circumspect.

Unfortunately, the market moved too far in the other direction and for a long time the property news was fairly bleak, with houses remaining unsold and prospective buyers being asked for huge deposits. Many people were unable to get a mortgage.

The 2013 budget finally brought a little relief to buyers and vendors, providing some positive property news at last. The government has launched the Help to Buy scheme, which is designed to help people get on the housing ladder or move to a bigger property.

Under the new proposals, anyone who wants to buy a newly built home can take out a mortgage for just 75% of the asking price, making up the difference with a mandatory 5% deposit and a government-funded equity loan which is interest-free for five years. The scheme is open to both first-time buyers and those wishing to move up the property ladder. No matter how much you earn, you will be eligible for the scheme. After five years the equity loan will be charged at 1.75%, rising each year after that by the retail price index plus 1%. You can repay the loan in full at any time.

Those struggling to raise a deposit will also benefit from the introduction of high loan-to-value mortgage guarantees. Those with a deposit between 5% and 20% will be able to get a guarantee for part of their mortgage, with the government covering any losses suffered by the lender if the borrower defaults. Again, this scheme is available to first-time buyers and house movers for new-build properties and older properties worth up to £600,000.

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