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Help to Buy equity loan borrowers pay a quarter less for homes

by: Samantha Partington
  • 25/09/2014
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First-time buyers using the Help to Buy equity loan scheme are paying a quarter less for their new build home, as the average purchase price under the scheme fell for the third month in a row.

Homebuyers not using the scheme are paying on average £254,000 while Help to Buy borrowers are snapping up new build homes for £193,318.

Help to Buy new-build homes fell by 0.6% from July to August, while open market buyers face a monthly increase of 5% on July’s average price of £243,000.

The data suggests that the scheme – which has a key focus on affordability – is improving access for entry-level purchases in the new-build market and reducing the financial strain on first-time buyers.

The average loan-to-value for an equity loan property was 72% in August: 2% higher than the market average of 70%.

The total deposit paid – including the government contribution – was £54,134 in August. Assuming consumers opted for the full government contribution of 20%, equity loan applicants put down £10,827 for their deposit: 84% less than the whole-of-market average at £69,235.

This deposit represents 32% of a typical Help to Buy equity loan applicant’s income (£33,362), compared to more than two times their yearly income should they be forced to pay the average deposit in the wider market.

Andy Frankish, new homes director at Mortgage Advice Bureau, said: “New- build properties are attractive to many groups of first-time buyers, offering a high standard of living without the need for renovation and lower maintenance costs.

“The Help to Buy equity loan scheme has been instrumental in making affordable new-build homes more accessible, with the government’s contribution easing the burden of saving for a deposit.”

Frankish said that the in light of the popularity of the scheme the construction industry needed to make sure its production met demand to keep conditions affordable for new entrants to the market.

The government’s Help to Buy equity loan scheme had helped just under 30,000 households purchase a property since it launched 15 months ago, September’s statistics revealed.


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