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October 9, 2019
3 minute read
First-time buyers using a Help to Buy equity loan are paying up to 22% more for homes than those who bought without one, according to new research.
If you’re buying your first home in Yorkshire using the Government scheme, you’re likely to be hardest hit. The ‘Help to Buy premium’ makes properties in the region on average 21.6% more expensive, according to figures from home-moving service reallymoving.
This is closely followed by the West Midlands, where you could pay 21.5% more and in the North West at 19.9%.
Meanwhile, first-time buyers in Scotland using Help to Buy equity loans are paying an average of 14.7% more. And in London, buyers using the scheme are paying an extra 11.8%, slightly higher than the England average of 10%.
It’s not all bad news everywhere though, in Wales the average Help to Buy premium was just 0.9%, according to the data.
This research follows data from the National Audit Office who’s own research in June put the Help to Buy premium at 1%, alongside a 15-20% premium on new build homes.
When it was launched, the Help to Buy equity loan scheme was designed to boost house building at a time when developers were nervous to build and getting a mortgage was harder unless you had a significant deposit. The scheme helped people who struggled to raise a deposit to buy a home.
Under the scheme, buyers need just a 5% deposit, topped up with a Government loan of 20% (or 40% in London) that is interest-free for the first five years. Under the rules, you can only use the scheme if you are buying a new-build property.
But critics argue that developers are taking advantage of the scheme’s attractiveness and inflating prices, resulting in these hefty premiums.
If you’ve got your heart set on a new build but wondering whether to buy with Help to Buy or not, here’s what you need to think about:
Commenting on today’s research, HomeOwners Alliance Chief Executive Paula Higgins adds: “It’s important for first time buyers to do their research on mortgages before being ushered into a new home showroom as they could decide an older home might be more suitable as well as holding its value better in the longer term.”
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