Help to Buy - the Pros and Cons

publication date: Aug 20, 2013
author/source: Kate Faulkner

Help to Buy

The Help to Buy Scheme has had a hugely positive impact on the property market within a matter of weeks of launching. From a delivery perspective, registrations under the Help to Buy scheme had, by the end of July reached 10,000 and developers plan to deliver an increase in supply of new build properties by nearly 30%.

The second part of the scheme which applies to all properties won't be launched until January 2014. There are fears that it will over heat the property market by increasing demand at a higher rate than supply, so prices will increase. The thought process is prices will increase until the scheme runs out and then without the support will start to fall.

Most property experts don’t believe this will happen and the forecasters projecting this scenario are typically economists who have been proved time and time again to get their property market forecasts incorrect!

Pros of Help to Buy

House XXX
  • The scheme is available to homeowners and first time buyers up to £600,000
  • It can help you get on the property ladder for the next five years 
  • The scheme allows you to buy a property at much lower mortgage rates than previous schemes
  • Taking advantage of Help to Buy now might mean you are able to buy a property at a lower price prior to prices rising in some areas beyond your reach 
  • You have to take out a repayment mortgage, so you start paying off your mortgage from day one

Cons of Help to Buy

  • If you can’t afford the repayments on the mortgage when interest rates rise, you will lose your property
  • You buy a property in an area where prices are still falling and your property could be worth less when the free government support ends
  • If Help to Buy causes a price bubble you could buy a property now, it increases in value, then falls again, leaving you in negative equity
  • Your circumstances change and you can’t afford the full mortgage without the government subsidy, so are forced to sell the property
  • Property prices don’t increase at all, so you can’t re-mortgage and have to find extra money to put into your property
XXX  House

For more information about Help to Buy read our article or sign up for FREE to download our
Help to Buy Checklist.

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All our information is brought to you by Kate Faulkner, author of
Which? Property books and one of the UK's top property experts.
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