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Average deposit shrinks as market feels Help to Buy effect

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  • 28/02/2014
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Average deposit shrinks as market feels Help to Buy effect
The average deposit needed for a mortgage is continuing to decline, buoyed by the rise of the Help to Buy scheme.

Research from Mortgage Advice Bureau found the average deposit needed to obtain a Help to Buy equity loan product was £12,106. This meant the government’s contribution of 20% of the purchase price was typically worth £36,683.

This increase in high LTV loans saw the average loan-to-value of all mortgage lending grow from 70% to 72% between December and January.

The typical applicant for a Help to Buy equity loan product was 31.6 years old, compared to 37.2 for the wider market. The average property was valued at £183,417 versus £212,389 for the rest of the market.

Across the whole market two, three and five-year fixed rates are all dramatically lower than at the same point last year, despite a recent spike in swap rates.

Andy Frankish, new homes director at Mortgage Advice Bureau, said: “Property prices and the supply of new homes are firmly established among the most pressing social issues of 2014, so it is high time we dispel the myths about Help to Buy and the equity loan scheme in particular.

“Developers have sprung into action which would not have happened without an injection of confidence. At the same time, annual price inflation on new build homes has averaged less than 2% over the last six months and has fallen consistently since September.

“The level of deposit for a new build home is much more realistic thanks to government help, and we are also seeing 95% mortgages having an impact across the wider market. What we need to see is more lenders committing to support the new-build sector, creating more choice for consumers and even more incentive for developers to fire up the kilns.”

Figures released by the government yesterday showed loans totalling more than £600m have been completed under the Help to Buy equity loan scheme since its launch last April.

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