{"id":5870,"date":"2018-12-30T03:53:03","date_gmt":"2018-12-30T03:53:03","guid":{"rendered":"http:\/\/www.styledeals.co.uk\/blog\/reality-check-how-does-the-government-help-first-time-buyers\/"},"modified":"2018-12-30T03:53:03","modified_gmt":"2018-12-30T03:53:03","slug":"reality-check-how-does-the-government-help-first-time-buyers","status":"publish","type":"post","link":"https:\/\/www.styledeals.co.uk\/blog\/reality-check-how-does-the-government-help-first-time-buyers\/","title":{"rendered":"Reality Check: How does the government help first-time buyers?"},"content":{"rendered":"\n
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Saving up for a deposit for a mortgage can seem daunting. <\/p>\n

Recent research suggests<\/a> that it can take a young person about 18 years to put together the downpayment on their first property – although the Bank of Mum and Dad can hurry the process along. <\/p>\n

But what help is available from the government for first-time buyers in the UK? <\/p>\n

1. Help-to-Buy Isa <\/h2>\n

Since December 2015, first-time buyers in the UK have been able to save in a Help-to-Buy Individual Savings Account (Isa). <\/p>\n

Under the scheme, savers receive a 25% bonus from the government when they withdraw the money they have saved to buy their first property. The maximum purchase price is \u00a3250,000, or \u00a3450,000 in London. <\/p>\n

The maximum government bonus someone can receive is \u00a33,000, if they have saved \u00a312,000.<\/p>\n

Savers can deposit up to \u00a3200 a month, although they can kick-start saving with a lump sum of \u00a31,200. <\/p>\n

The most recent figures show that<\/a> the Isa scheme has supported nearly 170,000 property completions between December 2015 and June 2018. <\/p>\n

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The average value of a property purchased using the scheme in the period to June 2018 stood at \u00a3172,787, compared with the average first-time-buyer price of \u00a3193,006. <\/p>\n

But, Iona Bain, founder of the Young Money blog, says Help-to-Buy Isas are on the way out, due to the the fact they won’t be available to new savers after November 2019, and to the introduction of the Lifetime Isa<\/a>. <\/p>\n

She said: “Depending on your point of view, Help-to-Buy Isas were either a boon or an impediment to young people. For some, it was a groundbreaking product that provided a boost to first-time buyers, and the first sign of a government taking young people’s financial goals seriously. <\/p>\n

“For others, it was a cynical giveaway for those who could already afford deposits, pushing up demand and propagating a broken housing system.” <\/p>\n

2. Help-to-Buy loans<\/h2>\n

The government lends up to 20% of the cost of a newly built property – or 40% within Greater London – so buyers need only a 5% deposit and a 75% mortgage to buy it.<\/p>\n

Those purchasing a new-build home aren’t charged interest for the first five years, either. <\/p>\n

According to the latest figures from the Ministry of Housing, Communities & Local Government (MHCLG), the government has provided \u00a39.9bn of Help- to-Buy equity loans since April 2013.<\/p>\n

The official data<\/a> shows that 183,947 properties have been bought with these loans in England. First-time buyers have accounted for 81% of total purchases.<\/p>\n

But some critics of the scheme have said that it is used by existing homeowners to discount purchases. They have accounted for over 35,000 purchases under the scheme so far. <\/p>\n

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The average Help-to-Buy purchase by a previous or existing homeowner costs \u00a358,000 more than one purchased by a first-timer in England. <\/p>\n

In the year to 30 June 2018 the number of first-time buyers purchasing properties under the scheme increased by 16% compared with the year before. <\/p>\n

Paula Higgins, chief executive of the Homeowners’ Alliance, said: “Although Help-to-Buy has enabled a whole generation of buyers who did not believe they had a chance of getting on the property ladder to aspire to home ownership, it has also benefited those who would have been in a position to buy anyway. <\/p>\n

“The difficulty with the scheme is no thought was put into the next step. These buyers can’t sell their homes to first-timers when they want to move on because those first-timers still need the equity loan to buy, [as the loans are] only available on new-builds. We need to think about how Help-to-Buy is dampening newly built second-hand sales.”<\/p>\n

Research by investment bank Morgan Stanley in 2017 also suggested that increasing demand for new-builds following the scheme’s introduction has pushed up prices.<\/p>\n

It found that the price of new-builds had outstripped second-hand properties by 15% since 2013. That led to critics saying that house builders had benefited significantly from the scheme. <\/p>\n

Similar ones exist in Wales<\/a>, Scotland<\/a> and Northern Ireland<\/a>. <\/p>\n

3. Shared ownership<\/h2>\n

The shared-ownership scheme is a cross between buying and renting.<\/p>\n

It lets borrowers purchase between 25% and 75% of a property, and pay rent for the remaining bit. <\/p>\n

The homes on offer are usually new-builds or those being resold by housing associations in England. <\/p>\n

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Over time, occupiers can “staircase” – buy a bigger share of the property when they can afford to – until they own 100% of it. <\/p>\n

In England, the eligibility criteria are that the purchaser is a first-time buyer, or someone who used to own but can’t afford to now. Annual household incomes need to be below \u00a380,000, or \u00a390,000 in London. <\/p>\n

Wales<\/a>, Scotland<\/a> and Northern Ireland<\/a> operate similar schemes. <\/p>\n

On average, people buying shared-ownership properties are 35 years old, according to the MHCLG<\/a>. <\/p>\n

The Council of Mortgage Lenders<\/a> has estimated that 200,000 UK households live in shared-ownership properties. <\/p>\n

In 2017, the chancellor announced that stamp duty – the tax applied when people buy properties above a certain value – would be scrapped for most first-time buyers. That was extended to include shared-ownership schemes in 2018.<\/p>\n

HM Revenue and Customs<\/a> says that more than 180,500 buyers have used the tax relief so far. <\/p>\n

Independent property expert Henry Pryor told BBC Reality Check there were several criticisms of shared ownership, including the fact that until you own 100% of the property, you’re treated as a tenant in law, which could mean you lose your property if you don’t keep up the rental payments. <\/p>\n

People also normally have to pay a maintenance or service charge on the whole value of the property – and buying a larger share can be expensive.<\/p>\n

4. Starter homes<\/h2>\n

The government announced the starter-homes initiative in 2014. It said it would build homes to be sold at a discount of 20% to first-time buyers between the ages of 23 and 40.<\/p>\n

Eligible buyers would need a combined household income of less than \u00a390,000 in London, or \u00a380,000 in the rest of England. <\/p>\n

The starter homes will generally be built on brownfield sites – land previously used for commercial or industrial purposes – although construction hasn’t begun yet. <\/p>\n

Housing minister Kit Malthouse said: “We are determined to restore the dream of home-ownership for a new generation, and last year saw the highest number of first-time buyers for over a decade.<\/p>\n

“Starter homes are part of this mission to build more, better, faster but it’s important we get them right.<\/p>\n

“We are working with the industry on the next steps as we move forward with development.”<\/p>\n

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