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New London homes in reach of first-time buyers

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Monthly costs for buyers of a new-build property using the London Help To Buy scheme could drop to significantly less than rental costs of a comparable property.

New London homes in reach of first-time buyers

Ray Boulger, of mortgage advisory firm John Charcol, believes the London Help To Buy Scheme – announced by Chancellor George Osborne in his Spending Review and Autumn Statement last month – will “massively incentivise” tenants in the capital to find the 5% deposit and other costs needed to purchase their first home.

The London-only Help To Buy Scheme will mean aspiring first-time buyers who want to purchase a new-build home can now get an interest-free loan of up to 40% of its value for five years.

Buyers will still have to raise a 5% deposit, with the remaining 55% of the new-build home’s cost being covered by a mortgage.

On top of this, the government is lifting the current restrictions on who can buy a home through shared ownership from April 2016 when anyone in London with a household income of less than £90,000 will be able to access the scheme.

If first-time buyers in the capital purchase a share of between 25% and 75% in a home, the rent on the rest of the property will not be more than 3% of the amount left.

On a property worth £227,000 where the buyer has bought a 40% share, for example, the rent will not be more than 3% of the remaining 60%. In this case £4,000 a year, or £340 a month.

Boulger at John Charcol points out that the London HTB scheme will result in much lower monthly costs for a comparable property than using the Starter Home scheme.

“Over five years, a buyer using the HTB Equity Share scheme would save £56,460 in monthly payments,” he says.

This could put pressure on landlords to reduce the rents they charge on property in London in a bid to encourage their tenants to remain in the property, letting agents warn.

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Property Wire

Neil Jennings

Neil background is in marketing and business development and has over 20 years experience in the field. He runs Asset Grove and is involved in the marketing strategy for most of our campaigns.

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