On Wednesday George Osborne, the Chancer…llor, announced his generosity within this years Autumn Statement. The new shiny equity loan scheme has been handed to hopeful London homebuyers as a way of getting them onto the property ladder.
“London Help to Buy” will offer buyers with a 5% deposit a loan of up to 40% on the value of a property which will be interest free for five years. However, this will only be available to those who are buying a new build property.
It seems that George Osborne has finally recognised the higher cost of living in London in comparison to other parts of the UK, by tailoring a help to buy scheme specifically for London homebuyers.
With the help of the Government’s Help to Buy schemes the number of first-time buyers across the UK has risen buy 60%. However, there has been little impact within the capital, where houses prices are far too high for the majority of young buyers.
Although it has been said that this will help London homebuyers it will have to be seen to be believed.
Russell Quirk, founder and CEO of eMoov, explains that 5% still provides little incentive to buy within London.
“Given that this translates to a deposit of £25,000 on the average London house price, I can’t imagine it will help too many who are struggling to get on the ladder in the first place.
We decided to ask London residents to shed light on the harsh reality of the capital’s property prices and see if they could save £25,000 as a deposit for a London home.
Sarah from South London explains that the percentage should be lower so that it is more achievable.
“Saving £25,000 for a house deposit would take rather a long time. I live in the south and its hard enough to try and save 5% deposit for a £200,000 flat, let alone paying London prices. I think for Londoner’s to get on the property ladder it should be less, maybe only having to save 1 or 2% to be able to get you started.”
Chloe, from Bromley, explains that in her case the scheme would be of no help.
“What Mr. Osbourne has said today wouldn’t be helping me in anyway at all. I just couldn’t save £25,000. Nobody can save £25,000 if they are already living in London and renting. Its just impossible. The only way that people can do it, is from borrowing money from their parents. Its not going to help the majority of people. I certainly don’t think it will help any of my friends.”
How the Scheme Works
- The scheme provides people with a helping hand onto the property ladder by letting them borrow up to 20% of the value of a new build home from the Government, which will be interest-free, for the first five years.
- Borrowers will need a 5% deposit and must take out a mortgage to cover the remaining 75% of the property price.
- Once the five-years interest-free have ended, borrowers will then be charged a fee of 1.75% of the loan’s value, which will increase every year by 1% above inflation.
People must remember that these fees only count toward the Government loan and come on top of the mortgage repayments. The equity loan must be paid back when borrowers sell the home, or at the end of the mortgage period – which ever comes first.
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