The Chancellor announced his Spring Statement on Tuesday 13 March 2018. In it, he emphasised building more new homes, improved transport and reducing debt. But what does this mean for you? Does it provide a real benefit to first time buyers and those struggling to buy a property?
The Government has consistently referred to the ‘housing crisis’ in the UK and has, for a number of years, committed to additional spending to enable first time buyers in particular to get onto the property ladder. Many criticise the Government for not doing enough. There are fears of a generational gap where millennials are unable to afford to buy a property or have the earning potential of their parents. Many changes were announced in the main autumn budget. The Chancellor was keen to point out that matters were moving on:
- The Government is working with 44 areas on their bids into the £4.1 billion Housing Infrastructure Fund to help build the homes that the country needs
- The Housing Growth Partnership, which provides financial support for small housebuilders, will be increased to £220 million
- London will receive £1.67 billion to start building a further 27,000 affordable homes by the end of 2021-22
Although an ambitious plan, there are no signs of the Government stopping spending for house building at any time soon. This may seem great news, but for many individuals the lack of housing is not the problem; the real problem is the affordability of those houses particularly for those wanting to get onto the property ladder. What real incentives is the Government offering?
Stamp duty assistance
Stamp duty for first time buyers was abolished within the Budget in autumn 2017 for buyers of homes under £300,000. There is a reduction of stamp duty for properties worth up to £500,000. According to the Chancellor, around 60,000 first time buyers have benefited so far from this scheme.
This certainly can assist with those extra ‘hidden’ costs when purchasing a home. However, stamp duty for first time buyers outside of London is often low or under the threshold altogether therefore not providing a real benefit for some people.
Help to buy assistance
The Government supports various ‘help to buy’ schemes. There are no plans to withdraw the schemes. Therefore, these could continue to provide a positive solution for first time buyers wanting to get onto the property ladder.
Help to Buy schemes are only available on new build properties and offer a loan towards the purchase of your property. This means that you can purchase a property with just: a 5% deposit; a 75% mortgage (meaning less borrowing from a bank); and a 20% loan from the Government. The loan is interest free for 5 years and repaid on selling the property or earlier. There are terms and conditions and not all house builders offer this scheme however it is widely available. In London, a larger Government loan of up to 40% is offered.
Further, a number of lenders offer a mortgage of up to 95% meaning a only a 5% deposit is payable. This would assist individuals struggling to afford the deposit but who are not intending to purchase a brand new home. However, you must take into consideration the interest rates of a 95% mortgage compared to a smaller mortgage.
Help to Buy ISA
As an incentive to save for a deposit, Help to Buy ISAs are available with all major banks and building societies. You can save up to £200 per month in the ISA and the Government will top up your deposit by 25% of your savings (up to £12,000). This means that you could gain up to £3000 with no repayment necessary. The condition is that the money is used towards the purchase of your property. This is available for each individual.
Shared Ownership schemes
In addition to the schemes above, many housing associations offer a shared ownership scheme. This means that you can purchase a share in certain types of properties and this is owned with the housing association. You pay a rent on the remaining share you do not own and you can purchase more of the shares in the property over the course of your ownership. This can assist people who may struggle to get a full mortgage on a property.
The Spring Statement highlights that property ownership, availability and support is far from perfect, but the Government is aware and is working on improvements. The Help to Buy schemes have been running successfully for numerous years, and there do not appear to be plans for stopping.