Since the sub-prime lending crisis – one of the shocks that triggered the initial economic turbulence back in 2008 – lenders have understandably expected larger deposits from homebuyers, leaving many people unable to get approval for a mortgage.
Now the government is taking action to overcome this problem through the Help to Buy scheme, a £12 billion package of government guarantees that it expects will allow £130 billion in high-LTV mortgages to be approved.
The Help to Buy scheme is due to be introduced in January 2014, subject to approval of its final design, and will run for a scheduled three years.
It will cover mortgages at LTV ratios of between 80% and 95% and customers not only including first-time buyers, but to all homeowners.
There is no income-based criterion applied to eligibility, and homes worth anywhere up to £600,000 will qualify for the assistance, which should cover the vast majority of British home purchases.
Meanwhile, buyers purchasing a new-build home may also qualify for Help to Buy: Equity Loan, a branch of the scheme that helps to delay payment of up to 20% of the value of the property.
This is again available on properties of up to £600,000 in value, with no income-related eligibility criteria, and at all rungs of the housing ladder – not just first-time buyers.
Lending is available for up to a fifth of the house value, repayable when the property is sold, and an estimated £3.5 billion is expected to be invested in the next three years through this measure.