The Government’s controversial Help-to-Buy scheme, which aims to stimulate the housing market, is already boosting sales in Bath and across the West, according to housebuilder Redrow.
It said take-up of the scheme, which helps buyers with low deposits obtain mortgages by underwriting the loan, has been stronger in the region than any other part the UK.
As a result, housing market conditions are gradually improving, with prices edging slowly upwards – 0.2% last month – and a 15.6% increase in sales, said Redrow.
Although the scheme, announced by Chancellor George Osborne, was launched just 10 weeks ago, Help-to-Buy sales already account for 10% of Redrow South West’s total sales since last 2012, the firm said.
Over the past two months take up of the scheme has been dramatic, with 43 plots in the region reserved using Help to Buy.
Under the initiative, buyers looking to buy a newly-built home are able to take out a mortgage for just 75% of the cost of the property provided they can provide a 5% deposit.
Those who qualify are eligible for an equity loan worth up to 20% of the value of the property, which is interest-free for the first five years.
This means homebuyers will be able to access much more competitive interest rates, making their mortgage repayments more affordable. The Government says Help to Buy, which launched in April, will help up to 74,000 buyers over its three-year life – although critics, which include a number of eminent economists and housing industry figures, fear it will lead to spiralling property prices and an increase in risky borrowing. That, in turn, could leave the Government facing huge debts if buyers default.
The initiative is an evolution of an existing scheme called FirstBuy, which went live in 2011, but Help to Buy can benefit those looking to move up the housing ladder, as well as first-time buyers.
Compared to FirstBuy, Help to Buy has fewer restrictions. The maximum property price considered is £600,000, the loan can be repaid at any time or when the purchaser comes to sell their home and there is no cap on the maximum someone can earn to be eligible. Critics have also pointed out that an unintended consequence is that the wealthy can use the scheme to buy second homes just as easily as first-time buyers can use it to get a foot on the housing ladder.
Redrow has found that around 40% of those using the initiative are not first-time buyers.
Redrow (South West) sales director Andrew Addison said: “We’re obviously very happy with the sales success thanks to Help to Buy. However, we are not surprised the initiative is proving so popular. It dramatically improves the outlook for many who want to move to a new home but do not have the large deposit required by many lenders. The initiative also opens the door for those who have saved hard for a 5% deposit, while allowing them access to better interest rates usually reserved for people with much larger savings.
