How Help to Buy got people onto the property ladder

Buying your first house is always a huge step, with the challenge of saving for a deposit proving a major obstacle for most would-be buyers.  

The Help to Buy Equity Loan Scheme was designed to make the whole process of buying a home possible and was aimed primarily at those aiming to get on the property ladder. And it’s helped thousands of first-time buyers: according to analysis by Money.co.uk, they accounted for 84% of homes bought through the Help to Buy scheme in England.

An analysis of figures from the Yorkshire Building Society, gov.uk, and Statista found that 302,225 properties bought through Help to Buy went to first-time purchasers. The scheme has seen £19.9 billion loaned to first-time buyers: the properties purchased totalling £82 billion in value. In 2021, 39,192 first-time buyers bought homes via the scheme, down by 5% from 2020.

Average buyer statistics outside and inside London.

About the Help to Buy scheme

The Help to Buy Equity Loan scheme was launched in 2013 and allowed people to borrow up to 20% (40% in Greater London) of the value of a new build house, with no interest to pay for the first five years.

First-time purchasers in close proximity to the West Midlands have benefited from it most since then: 12% of all Help to Buy secured home sales have been seen there, twice as many as those in the North East (6.1%). In the East Midlands, 5.7% of homes were bought through Help to Buy; in the South East the figure was 4.8%, in the North West it was 4.4% and just 4.1% of buyers in London made use of the scheme.

The scheme closed to new applicants on 31st October 2022. As of September 2022, the whole process had enabled the purchase of 375,654 houses; of these 316,805 were first-time purchasers who made up 84% of all homes bought through the scheme.

UK buyer statistics.

What’s the average age for getting onto the property ladder?

It’s no surprise that the average age for buying a house has been rising: between 2021-22, the average age outside London is 33.4; between 2005-06 the average age outside London was 30.6. In the 1990s it was 29.  Of course, the rising cost of living is a key reason for people delaying getting onto the property ladder, and it’s made a big difference in recent months. In some areas, prices are still rising, making it harder to save a deposit. Another reason for people putting off buying goes back to the tighter lending rules brought in after the 2008 recession.

How many first-time purchasers are there in the UK now?

The highest number in over 15 years was seen in 2021 (408,379), which was influenced by Covid 19: lockdowns gave people time to save, and the introduction of Stamp Duty relief incentivised many to buy property. This number dropped to 370,287 in 2022.

Before the financial crisis in 2009, there were 400,900 people aiming to buy their first property, but after that, numbers fell to 191,000. The recovery in the number of people wanting to get onto the property ladder since then is surprising given that UK prices have continually risen, going up by 70% from £166,606 in May 2006 to £283,496 in May 2021. First-time purchases buyers make up 53% of overall UK sales – the highest figure for 10 years.

Where are people buying their first property?

While the number of first-time investors fell across the UK last year, the South East saw the most (73,588) and Northern Ireland saw the fewest (10,641). Numbers have fallen the most (12.5%) over the last year in Wales and the South East, while The Midlands saw just a 6.8% drop.

Average house price for a first-time house buyer in Great Britain

In December 2022, the average price was £245,958, around £55,500 higher than five years previously and a 29% increase. London is the hardest place to get onto the property ladder – here the average cost of a first house is £469,496. Best value can be found in the North East where the comparable price is £139,984.

What’s the average deposit for a first property in the UK?

Generally, a deposit of 5% of the property’s value is required for a UK mortgage, but a larger deposit is needed to access the best rates and deals. The UK average first-time deposit is £61,000 – or 26% of the average first-time house purchase price of £236,783.

What’s the average monthly mortgage for a first-time purchaser?

It’s £198,779, but this figure is skewed by London and the rest of the country. In London, it’s £358,741, over three times as much as in the North East where the lowest figures are found.

Property prices compared to a first-time purchaser’s salary

The average first-time house price rose by 18% between May 2016 and May 2021, from £178,923 to £210,480. However, the average UK salary rose just 12.5% from £23,084 to £25,971 between 2016-2021. Over the last 20 years the ratio of house prices to earnings has risen consistently, and is now at its highest point, 5.6 compared to 8.5 for home movers.

In London, the price of a first house outstrips earnings the most, with a ratio of 8.4 (average house process compared to gross annual earnings).

Other options for help onto the property ladder

While the Help to Buy scheme ends in England at the end of March 2023, (and applications closed several months ago) there are other government-led schemes available to help you get on the property ladder.

Claire Flynn, an expert at money.co.uk mortgages said that the Help to Buy equity loan scheme has helped hundreds of thousands of first-timers get onto the property ladder and a total of 316,805 homes have been purchased through it. Of the alternative schemes available, she said:   

One example is the Shared Ownership scheme, which is useful to anyone who can’t afford a deposit and mortgage repayments on a house. Rather than buying a full property, you buy a share of the house which you’ll have a mortgage for. You then pay rent to a landlord on the remaining share. You’ll need to buy between 10% and 75% of the market value price of the property, as well as be able to put down a 5% to 10% deposit on the property.

Another government scheme available is the First Home scheme. This allows first-time buyers in England to purchase properties for 30 to 50% less than the market value. The home must be either a new build or a resale home that was originally bought as part of the First Homes scheme. To be eligible for the scheme you must be able to get a mortgage for at least half the price of the home, the house you purchase must not be valued over £240,000, or £250,000 in London, and your average income must not exceed £80,000, or £90,000 in London. 

It’s also worth opening and investing in a Lifetime ISA to help you save money towards a house. With these types of ISAs, you can save up to £4,000 every year and there is a 25% bonus from the state. This means there’s a possibility of saving £5,000 a year towards a house with a Lifetime ISA. However, you must either use the money to purchase your first home (worth £450,000 or less) or retirement, or you’ll likely face penalties on your savings. 

Aside from government schemes, there are some mortgage products that may help you get on the propery ladder if you have a family member able to help. Guarantor mortgages allow a friend or family member (such as a parent) to act as a guarantor on the loan, making them responsible for repaying the mortgage if you can’t. This reduces the risk for the lender making them more likely to consider lending to you even if you have a small or no deposit. 

There are also family deposit mortgages that allow a family member to put a sum of money into a savings account run by the lender, which acts as your mortgage deposit. The savings earn interest but can normally only be withdrawn once the mortgage has been repaid or you switch to another deal.

Conclusions

If you’re saving to get onto the property ladder, it’s important to arm yourself with all the relevant information. Now that Help to Buy has ended, investigate the options outlined above, research the best first time buyer mortgages and take advice. As well as saving for a deposit, sound knowledge will help you to climb aboard the property ladder.

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