On 20 March 2013, the UK Government announced the introduction of a new scheme - Help to Buy, to assist British Nationals or residents who want to get on or move up the property ladder.
Since the Global Financial Crisis (GFC), UK banks have generally been unwilling to extend lending to buyers with small deposits. While buyers with larger deposits of between 25% to 40% have been able to access relatively cheap and a wide range of loan products, those with 5% deposits have had to contend with largely expensive products.
For example, a typical three-year fixed rate mortgage for a person with a 25% deposit costs around 2.5%, while a buyer with a 5% deposit could pay a rate of just over 6%. With the average price of a property in London now higher than at the 2007 peak, it has become increasingly difficult for the average Londoner to save a sufficient deposit to purchase a property at an affordable interest rate.
What is Help to Buy?