MORTGAGES AND THE PROPERTY MARKET

The property market is reported to be rising at a rate higher than for many years, although this does vary according to where you live. Contributing to this is likely to be the strong increase in the number of First Time Buyers, which is rising more quickly than for many years. There are several reasons for this. First, mortgage rates have fallen to their most competitive level for many years, if not ever. Another reason is the assistance that the Government has been providing through its “Help To Buy” schemes. The focus of the “Help To Buy” schemes most recently have been new properties. The Help To Buy equity loan scheme provides help in the way of any equity loan so buyers with only a 5% deposit can get help with a loan of a further 20% of the purchase price, so that buyers only have to get a mortgage for 75% of the purchase price. The equity loan carries no payments for the first 5 years. When the property comes to be sold, 20% of the sale price will need to be used to discharge the loan – regardless of whether the property value has gone up or gone down. Another option for new properties has been the NewBuy scheme. This is also intended to help those who can contribute only a 5% deposit. In this case the builder and the Government pay for an insurance policy which guarantees part of the mortgage, so if the property is sold at a loss, the insurance policy will cover the difference. With this scheme and the equity loan scheme, the buyers must be using the scheme to purchase the property for their own private residence. They do not have to be First Time Buyers but they cannot have any other properties. And most importantly, of course, with either scheme the purchasers need to be able to afford the mortgage and meet the lenders’ income and affordability requirements.