As stated by George Osbourne in last years autumn statement, the new shiny equity loan scheme has been handed to hopeful London homebuyers as a way that will help them get onto the property ladder in London.
‘’London help to buy’’ will offer any buyer a 5% deposit loan of up to 40% on the value of a property which they will receive interest free for 5 years, But before you get too excited this will only be available to people who are buying a new build property.
It does show that George Osbourne has finally recognised the higher cost that people are subjected to in London compared to other parts of the UK, by tailoring the help to buy scheme specifically for London homebuyers.
With the help of this new help to buy schemes the number of first-time buyers across the UK by 60% however in the capital, where house prices can be astronomically high there has been little impact as the house prices are still far too high for the majority of young buyers.
Although it has been said that this will help London first time buyers, It needs to be seen to be believed.
Russell Quirk, founder and CEO of online estate agent emoov, explains that 5% still provides little incentive to buy within London.
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“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.”
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