Help to Buy brings first-timer price down

The average price for a house purchased with a Help to Buy 2 mortgage was £151,021 in April 2014, yet generally first-time buyers paid £193,000 in March; a 22% difference.

Brian Murphy, head of lending at Mortgage Advice Bureau, said: “These findings suggest that mortgages at 90% and 95% LTV are being used carefully and responsibly through Help to Buy to give first-time buyers an option that was in danger of becoming extinct.

“The Bank of England and government are coming under increasing pressure to take the heat out of sectors of the housing market, but writing off a scheme that is aiding those who most need it – predominantly first-time buyers with modest levels of deposit – is not the way to go about it.”

According to the National Mortgage Index the average LTV on a Help to Buy 2 mortgage is 92.5%, while CML figures show that the average LTV for first-time buyers is 81.3%.

The majority (82%) of Help to Buy purchases using the mortgage guarantee are made by first-time buyers, while 85% are outside of London and the South East.

On a £151,021 property Help to Buy makes the difference between needing a deposit of £11,326 and £28,241, with the latter figure representing the first-time buyer average.

Murphy added: “Lending standards have been carefully monitored ever since the recession, and the new mortgage rules [under the Mortgage Market Review] mean that scrutiny of borrowers’ finances remains rigorous and thorough with careful consideration given to the impact of future interest rate rises.

“Providing this continues, there is a strong argument to support the availability of mortgages with far more realistic deposit requirements than has become the norm in an increasingly lop-sided housing market, especially for aspiring first-time buyers.”