Help to Buy won't help the average first time buyer

rentingvshelptobuy.pngFirst-time buyers would be better off renting than buying a house under Help to Buy, according to new analysis of housing market figures by PricedOut, the campaign for affordable house prices.

Interest rates are so high under the Help to Buy mortgage guarantee scheme that the monthly repayments for the average first-time buyer in England and Wales with a 5% deposit are more expensive than the monthly rent on an average home – by between £26 in the North East and £296 in London.

This means that it would be cheaper for people with a small deposit to continue renting and use the difference to keep saving – unless house prices rise by more than is predicted. Depending on the region, house prices would need to rise significantly – by 6% per year in the North West, by 34% in the South West and by 28% in London – for it to be worth using Help to Buy now. Despite this, PricedOut warns that the government is putting families under pressure to get on the ladder by taking on unaffordable levels of debt. 

 

As an example, the average rent in London is £1141 per month. An average first time buyer in the capital using Help To Buy can expect to pay £1437 per month, based on average price of a first home of £256,000, a 5% deposit of £12,800 and an interest rate of 4.99%. With the prospect of the Bank of England base rate increasing, repayments will only increase in future. Instead, by saving the difference someone in London considering Help to Buy could instead increase the size of their deposit by an average of 28% over the course of a year.

Monthly repayments of a Help to Buy mortgage are around 40% higher than those for a typical 3.8% mortgage with a 25% deposit.

PricedOut spokesman Dan Wilson Craw said:

“This analysis suggests that Help to Buy will not help the average first time buyer, despite the government’s insistence to the contrary. When tenants see house prices rising they will feel pressure to take advantage of a 95% mortgage, but in doing so, many will find themselves overburdened with debt and will be paying vastly more than they would in rent, particularly in the South. And that’s even before you consider the impending interest rate rises a few years down the line.

“The millions of us renting want to be able to buy our own home eventually but, with house prices too high, all David Cameron and George Osborne have offered us is a Ponzi scheme to pull the wool over our eyes and help inflate the value of their London property portfolios even further. Continuing to rent and save appears to be the better option for most tenants.

“Instead of showering us with debt, the government need to make the actual houses cheaper and the only way they can do that is to build more of them.”

Ends

Notes to editors:

For further information please contact press@pricedout.org.uk.

PricedOut (www.pricedout.org.uk) represents the millions of people who would like to buy their own home but cannot buy because of high house prices and high rents. The campaign is independent of any political party and supports initiatives to increase the supply of good quality affordable housing throughout the UK. 

Region

Average price of a first home (CML)

5% Deposit

95% Loan

Monthly repayment at 4.99% (BBC)

Average rent (LSL)

Saving after 1 year if renting

% increase in saving

London

256,000

12800

243,200

1437

1141

3552

28

East

141,000

7050

133,950

791

739

624

9

South West

153,000

7650

145,350

859

641

2616

34

Yorkshire & Humber

108,000

5400

102,600

606

547

708

13

North West

111,000

5550

105,450

623

597

312

6

Wales

110,000

5500

104,500

617

573

528

10

South East

183,000

9150

173,850

1027

787

2880

31

North East

104,000

5200

98,800

584

533

612

12

West Midlands

120,000

6000

114,000

673

577

1152

19

East Midlands

116,000

5800

110,200

651

565

1032

18

Source of rental data: LSL Buy-to-let index http://www.lslps.co.uk/documents/buy_to_let_index_sep13.pdf

Source of price data: Savills analysis of CML data http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10388839/Help-to-Buy-map-Where-it-could-work.html

Repayments calculated by BBC online tool, assuming a 4.99% interest rate and a 25 year mortgage: http://www.bbc.co.uk/homes/property/mortgagecalculator.shtml

George Osborne and David Cameron both list rental income from residential property on the House of Commons Register of Members’ Interests: http://www.publications.parliament.uk/pa/cm/cmregmem/131028/131028.pdf


Showing 1 reaction

Please check your e-mail for a link to activate your account.
  • commented 2017-11-10 05:21:32 +0000
    Thanks for sharing this valuable records to our imaginative and prescient. You have published a trust https://www.assignmentcrux.co.uk worthy weblog keep sharing.