London 'Help to Buy' scheme: what you need to know about the new options for first-time buyers

Aspiring first-time buyers who want to purchase a new-build home can now get a loan of up to 40 per cent of its value, interest-free for five years.

Chancellor George Osborne has recognised the limitations of the Help to Buy scheme in the capital, by announcing a new London Help to Buy scheme as part of the Autumn Spending Review.

The current scheme offers London's first-time buyers loans of up to 20 per cent of the property value. The reviewed arrangement will offer 40 per cent Government-backed loans.

Buyers will still have to muster a five per cent deposit. The remaining 55 per cent will need to come from a bank or building society mortgage. 

Osborne has changed the Help to Buy scheme as only 3,128 Londoners have used it to get onto the housing ladder – a rate of less than 30 sales per week - since the scheme launched in April 2013.

However, Susan Emmett, research director at Savills, warned young buyers to think hard about the risks of taking on huge debts – a mortgage plus a Government loan. 

“With the average cost of a home in London at about £500,000, a 40 per cent equity loan represents a debt of £200,000 which accrues interest costs after five years in addition to servicing a mortgage of up to £275,000,” she said. “And buyers will still need to find a deposit of at least £25,000.”


READ MORE: Buying in London: five 'Help to Buy' homes from £306,000 for first timers

London Help to Buy in numbers:

  • The average cost of a first-time buy in London is currently around £350,000. 
  • This will mean finding a five per cent deposit of £17,500.
  • The Government will provide 40 per cent of the price, or £140,000.
  • First-time buyers will therefore need a £192,500 mortgage.
  • To raise this sum, assuming they are able to borrow four times their annual salary, they will need a salary of £48,125 to make London Help to Buy work for them.

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