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Nearly 50,000 use Help to Buy - with only 3pc of 'phase two' money taken



While the Government hailed the Help to Buy scheme a success, demand for the second phase appears to be far lower than anticipated

New-build house in Buckley
Nearly 50,000 have turned to Help to Buy to get on the properyt ladder 

Nearly 50,000 households have been helped by the Government's flagship Help to Buy mortgage support scheme with take-up proportionally far higher outside of London and the South-East.

While the Government hailed the scheme a success, demand for the second part appears to be far lower than anticipated. The Treasury set aside £12bn-worth of guarantees for three years, on the basis it will remain open until December 2016. After nine months, only £388m or 3pc of this money has been used.

A total of 48,393 homes have been bought under the scheme and 82pc of house sales have gone to first-time buyers, the Government said.

The figures include both the Help to Buy equity loan scheme which was opened in England in early 2013 and the UK-wide Help to Buy mortgage guarantee scheme, which was made available last autumn.

Both schemes offer access to the market with a deposit of just 5pc but, unlike the mortgage guarantee initiative, the equity loan scheme is aimed at new-build homes only.

The figures continue to show that the scheme is having only a limited direct impact on parts of the country where house price rises are at their most heated.

Although the South-East saw the highest number of Help to Buy loans taken, at 7,501, this was only 1pc of all mortgages. Help to Buy made up the greatest proportion of total mortgage lending in the east of England (6.2pc) followed by the North-West (3.8pc) and Scotland (3.7pc).

The average house price for both parts of the scheme, at £187,800, was 30pc below the national average house price of £265,000.

The typical price was £209,390 for the first phase, new-build only scheme, and £153,148 for the second phase (see full explanations of each below).

The local authority with the most Help to Buy completions has been Leeds with 763, followed by Wiltshire, Birmingham, Central Bedfordshire and County Durham.

The Treasury has asked the Financial Policy Committee to monitor the scheme. It is due to meet later this month to discuss the impact.

Last month, Lloyds, Britain’s largest mortgage lender, reduced the amount it will lend to first-time buyers under Help to Buy. It capped its lending at £150,000, down from £500,000. Other lenders may follow suit which would further trim the take-up of the scheme in the South-East, where house prices have climbed rapidly in the past year.

The figures showed 82pc of Help to Buy mortgages went to first-time buyers compared to 31pc for the whole mortgage market.

George Osborne, the Chancellor, said: "It's great to see that nearly 40,000 first-time buyers have been helped on to the housing ladder by the Help to Buy scheme.

"This is a key part of our long-term economic plan, which is supporting hardworking people to secure a better future for their families.

"Importantly, Help to Buy is also driving a big increase in house-building in Britain, boosting the construction industry and increasing housing supply."

Help to Buy mortgages as percentage of all lending, by region

What was Help to Buy phase one?

Those with a 5 per cent deposit can borrow up to 20 per cent of the value of a new-build home from the Government in the form of a loan that is interest–free for the first five years. The remainder is funded through a mortgage via one of the participating lenders, such as Nationwide, Woolwich or NatWest. Most offer specific Help to Buy mortgages, though Nationwide allows access to its usual product range.

After five years, if the government loan has not been repaid, it will start to incur interest at a starting rate of 1.75 per cent, rising by 1 per cent (of that figure) per year, plus inflation. So if inflation were 2 per cent, the mortgage rate the following year would be 1.8 per cent.

Borrowers should get much better rates than those normally available to those with just a 5 per cent deposit, as they effectively have a 25 per cent down payment.

Letting out the home is not allowed.

What was Help to Buy phase two?

The first phase applied only to newly-built property being bought by first-time buyers. This second phase applies to all property, old and newly-built, provided it costs less than £600,000. And loans are available to all borrowers, not only those buying a home for the first time. Borrowers who qualify will be offered a loan of up to 95pc of the property’s value.

This second scheme works by providing a guarantee whereby the Government would make good lenders’ losses if the property was repossessed and prices fell. This bit of the scheme was initially due to begin next year, but was brought forward. In June, rules were tweaked so new mortgage guarantee loans were restricted to 4.5 times borrowers’ income.

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