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Help to Buy equity loan helps just one in 10 London buyers

  • 15/02/2017
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The government’s Help to Buy equity loan scheme has helped just one in 10 consumers between April 2013 and April 2016 secure a property purchase in London, BBC analysis reveals.

Taking all households into account, fewer than one in every 500 London homes have been bought using a Help to Buy loan, in contrast to one in 200 outside the capital, the findings showed.

The scheme gives buyers the opportunity to take out a government equity loan of up to 20% of the value of the property, which rises to 40% for new-build homes bought in London. Homebuyers must contribute a minimum deposit of 5%.

Between April 2013 and April 2016 the scheme has helped secure one in three purchases outside London, equivalent to more than 100,000 homes across England. The average loan across all regions in England was £46,301.03, according to the BBC’s analysis of official figures released by the Department for Communities and Local Government (DCLG). In London, equity loans of up to £190,000 are being taken out by buyers.

In the capital, 4,483 purchases were carried out using the Help to Buy equity loan scheme out of the 41,480 privately built homes from 2013 to 2016. Uptake of these loans in Greater London climbed after February 2016, when the upper limit of the equity loan for purchases in the capital was increased from 20% to 40% of the property’s value.

The results are all the more stark when drilled down to London boroughs. In Hammersmith and Fulham, just 10 Help to Buy equity loans have been taken out, with six of these buyers taking out the loans between June and September 2016 alone. Meanwhile, in Kensington and Chelsea, the only two loans taken were worth £360,000, combined.

The Help to Buy equity loan scheme has come under fire of late, with experts criticising its lack of product choice for homeowners looking to remortgage onto a more suitable deal after their initial mortgage product term has ended.

In an investigation carried out by Mortgage Solutions, one mortgage broker said restricted choice, high fees and poor service in this sector of the remortgage market meant that equity loan borrowers were “trapped, effectively mortgage prisoners”.

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