The return of the 0% mortgage has piqued the interest of many house-hunters interested buying new, but with other schemes such as Help to Buy on offer - which comes out on top?
The latest reports suggests that first time buyers are struggling to get onto the property ladder and further evidence from Legal and General claims that the 'Bank of mum and dad' will lend their children over £5 billion this year to help them buy their first property.
It therefore comes as no surprise that Barclays has recently launched a new 0% deposit scheme. New buyers might be tempted by such initiatives, but whilst they sound tempting, are such schemes better than the government backed Help to Buy?
Adam Champion from New Homes Mortgage Helpline, an independent new homes mortgage broker, explains: "Hefty mortgage deposits are often cited as the main barrier stopping first time buyers from being able to buy their own home.
“The government has already introduced various schemes under the banner of Help to Buy, which has enabled thousands of people to move on to or up the property ladder with a 5% deposit. However, mortgage lenders are still having to do more and finding new ways to change perception among first time buyers and helping to overcome the initial financial barrier of raising a deposit."
This latest product from Barclays removes the need for the buyer to put down a 5% deposit, and instead requires the 10% contribution from parents. This cash contribution will then be returned to the borrower's parents after three years with interest at 1.5% over the Bank of England base rate - provided the mortgage repayments have been met."
Through such schemes, buyers can borrow up to 5.5 times their income provided they have an income of over £50,000 and can secure a property with a purchase price of up to £500,000.
“For buyers wanting a new build property Help to Buy still leads the way,” said Adam.
"Under the new Barclays scheme, a typical first time buyer without a deposit could secure a three-year fixed rate of around 2.99% but the product is only available on second hand homes. For first and next time buyers looking to reap the energy efficiency benefits of buying a brand new home, and potentially not having to spend thousands of pounds on renovation and DIY after they move in, the government Help to Buy scheme is still proving to be a popular choice."
For one couple, Ruth McNamara and her partner Jeremy Hart, Help to Buy was the only way they were able to secure their dream property at Linden Homes development, Hawthorn Mews in Bedhampton, Hampshire.
To make their purchase more affordable, Ruth and Jeremy, both first time buyers opted to use the Help to Buy scheme. “We wouldn’t have been able to buy a home without Help to Buy. When you’re renting you pay over the odds anyway and then having to save for the deposit on top of general living costs is so hard nowadays. Help to Buy allowed us to secure that all important deposit and luckily my parents very kindly gave us a large proportion of the monies we needed which helped pay for our deposit and solicitor’s fees to make it happen.”
The couple have also found customer service from Linden Homes to be excellent: “The team at Linden Homes have been brilliant. The site staff have been very attentive and made the whole process so simple. And the Help to Buy process has been seamless too. There isn’t lots of paperwork as people might imagine; it’s no more detail than when you apply for a job for instance. We have been recommending the development to friends as it really checks every box and Help to Buy makes getting on the property ladder a reality!”
Through the Help to Buy scheme, buyers only need a 5% deposit, with the government lending up to 20% of the value of your property through an equity loan, which can be repaid at any time or on the sale of the home. Buyer therefore only need fund a 75% mortgage, as opposed to a 100% mortgage under the new Barclays scheme. Despite the common misconception, Help to Buy is also available to both first and next time buyers.
Adam Champion further commented: "At New Homes Mortgage Helpline we've helped over 2,585 people to buy their new Linden home, since the Help to Buy scheme launched in April 2013 and with typical HTB rates around 1.89% on a typical 2 bedroom home worth £200,000, a buyer would only need a deposit of £10,000 with monthly mortgage repayments as low as £550 pcm over 30 years - a far cheaper option than renting."
Help to Buy is available at number Linden Homes developments throughout the south of England, including:
Media can contact Alice Cannell or Fotini Efastathiou on 01962 893 893 for more information, images and interviews with Linden Homes.
20 May 2016