The second phase of the Help to Buy scheme will undoubtedly help FTBs by reducing the required deposit for a mortgage currently an average of £33,948 nationally (and over £60,000 in London) to £7,218 nationally (£12,800 in London).
In 2003 there were 369,600 FTB loans. Now they account for only around 240,000 per annum and this is in the context of a much reduced total market.
The influx of new demand from Help to Buy will also encourage ‘second steppers’ to put their own homes on to the market, and to look for their second owned homes. This means that the extra demand initiated by FTBs will ripple up the housing ladder helping to ease the log jam resulting from a shortage of property to sell that exists presently. Paul Smith CEO of haart comments:
“The new Help To Buy Scheme will boost demand by reducing a required deposit for a FTB home to an average of £7,218 rather than the current average £33,948. But more importantly the extra demand should encourage second steppers, those already in their first owned home, to sell into the stronger demand. Second steppers will be further buoyed by the fact that they can also take advantage of 5% deposits if they are short of equity.
“This, in turn will start a demand and supply chain reaction further up the housing ladder, generating a much needed improvement in the number of property transactions nationwide.
“We predict that property transactions will rise by 10-15% over the next 12 months, which will moderate the current excess demand in the market, taking the pressure off house prices. We see house prices rising only moderately in the coming months.”
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