Help to Buy Scheme to be Extended Until 2020
Phase one of the UK's Help to Buy scheme, which was earlier due to finish in 2016, has been extended to 2020. The scheme is crucial to the UK's recovery in the real-estate market. It gives new home buyers access to a loan backed by the government that can reach 20 percent of the property's cost. George Osborne, the Chancellor of the Exchequer, confirmed the extension, ahead of the Budget earlier this week.
Phase one extension proves beneficial to home buyers
With the Help to Buy scheme, home buyers can borrow an amount that is up to 20 percent of the new property's price from the government, which means they require a mortgage of 75 percent and a cash deposit of 5 percent, to add up the net amount. The extension that is to come into effect, only pertains to phase one, meaning, newly built homes. Phase two, which pertains to providing mortgage guarantees to banks that lend to buyers who have smaller deposits, will remain unchanged.
The Chancellor is soon expected to declare his support of the upward swing in the UK's construction activity, and that constructions in Britain are crucial to improving the economy. The Chancellor announced the construction of the first garden city in the UK, in Kent, with an initial set-up of 15,000 new houses, at the Ebbsfleet site. He says that the extension in the scheme will help in constructing nearly 120,000 new houses.
Others, like Mark Carney, the governor of Bank of England, has warned against it saying, they need to exercise caution or it will result in another price bubble in the property market. South East England and London are especially vulnerable to it, due to the rate at which their prices are shooting up, he says.
House building targets appear reachable with extension in time frame
Knight Frank's UK residential research head, Grainne Gilmore, says that house builders will welcome the decision involving the extension of the scheme's equity loan. Long term and larger development schemes stand to benefit from the increased time frame, which can in turn boost the house building levels to reach targets set by the government, she says. The scheme has so far been evenly spread out across the UK. Leeds takes a majority of the equity loans, which suggests that it may be providing a broader support to England's house building.
Will the Chancellor manipulate the £12.5 billion amount to be put aside for the second phase of the scheme? So it covers the additional cost of 6 billion pounds, of the four-year extension to equity loans, or the parameters, is the big question, she says. Recent reports says that the Government's Equity Loan has been used to buy about 15,000 properties, since last April. In January, about 2,000 mortgages were finalized through the scheme, across England, which is a slight drop in comparison with the 7,500 mortgages that were finalized during 2013's last three months.