We have all heard about Help To Buy, which has appeared in various forms over the past few years. For the first time however, we now have a specific regional version of the policy, Help To Buy London, which on the face of it at least looks as if it could make a real difference to some buyers.

But what exactly is it?

Announced by the Government on 25 November 2015, the creation of a London Help to Buy scheme stunned observers as it offers prospective buyers a whopping 40% equity loan in recognition of the higher housing costs in the capital, (other versions have been limited to a 20% loan).

In other words, buyers in Greater London with a 5% deposit, can add a loan of up to 40% of the value of a new build home costing up to £600,000. This means that aspiring home owners only require a 55% loan to value mortgage, not a 75% mortgage, thereby making the house purchase commitment more affordable, and benefiting from lenders lower interest rates too. What is more, this loan is interest-free for the first 5 years.

George Osborne, the Chancellor, said it has been developed in recognition of the higher cost of housing in Greater London than in other parts of the UK. Although the policy has come in for a fair amount of criticism in the past, with some saying that it just increases demand rather than supply, the Help to Buy schemes have actually resulted in a 60% rise in the number of first-time buyers across the UK.

However, it has had significantly less impact in the capital, where house prices can look out of reach to the majority of young buyers.

The Government say full details of the new scheme will become available in early 2016, and Aldwyck Housing Group will be the Government appointed Help to Buy Agent for Equity Loans in London.

The good news is that Coreco will be advising on mortgages for use with the London Help to Buy scheme, liaising with Aldwyck on all the administrative requirements needed to apply for the equity loan, which is taken as a second charge behind the mortgage lenders first charge.

Commenting on the scheme, Matt Lowndes, Managing Director of Coreco said:

“It changes the dynamics of affordability in London where the average price of a two-bedroom home is £460,000. Previously, many young Londoners’ incomes were too low for a lender to approve a 75% mortgage, leaving a shortfall that could only be met by the buyer putting down a larger cash deposit. This can be very difficult to save for those people who already have a hefty monthly rent to pay.”

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