Help To Buy welcomed by Savills Scotland

Following the launch of the Government's first phase of Help to Buy south of the border, Scottish buyers will be able to access assistance to purchase a new home from house builders who have registered with the Scottish Government's Help to Buy (Scotland) scheme, from today (Monday 30th September).  In addition, Savills welcome the earlier than expected introduction of the mortgage guarantee element of Help to Buy which was announced by David Cameron at the weekend.
According to Savills Head of Research in Scotland Faisal Choudhry, Help to Buy (Scotland) will provide a welcome boost to the development industry, which has been deeply impacted by the bank lending restrictions of the past five years,  as well as to first time buyers and those hoping to move up the housing ladder.
Unlike previous arrangements, the shared equity scheme is available for existing homeowners in addition to first time buyers, and will provide a loan for up to 20% of the purchase price of a new property, as long as the existing home is sold first.  The maximum purchase price will be Ј400,000 in Scotland, rather than Ј600,000 for the English scheme which has been operating since April 2013.  Unlike their English counterparts, Scottish buyers will not incur any interest charges on the equity provided by Scottish Government.  Under a shared equity agreement with the buyer, the Scottish Government will provide up to 20% of the purchase price and will retain this level when the house is ultimately resold.  The buyer's mortgage and deposit must cover a minimum of 80% of the new build home.
The early introduction of second phase of Help to Buy both sides of the border, just announced by Prime Minister David Cameron and  three months earlier than anticipated, has been welcomed by Savills  This mortgage guarantee element of the scheme was not anticipated until January 2014 but is likely to be available as early as next week.  It will see the Government underwrite 15% of the value of a mortgage and could allow people to buy new build and second hand properties of up to Ј600,000 with a minimum 5% deposit.
Faisal Choudhry said:  "Both the shared equity and mortgage guarantee elements of Help to Buy, are being launched into an improving market, triggering concerns that such stimulus measures could provoke another property bubble.  However, Help to Buy is likely to have a bigger impact on transaction levels and house building than house price growth, which will continue to be tempered by affordability constraints and the prevailing weakness of the economy.  This will be particularly true in Scotland where record levels of available prime stock on the market is subduing values.  
"Take-up of the scheme by mortgage lenders could be limited by wholesale lending markets and limits on exposure to the residential property market.  Appetite from borrowers could be limited by the mortgage rates they are offered, and the fact that mortgages under this scheme will only be available on a capital repayment basis."
Savills Research estimates almost a third of this scheme is likely to be taken up by remortgaging, even though it requires a change of lender.  The scheme excludes buy-to-let and second home purchases.

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