Those struggling to buy in the capital will take some comfort from the launch of the London Help to Buy scheme in today’s Autumn Statement. George Osborne announced that the more generous version of the national Help to Buy scheme will enable buyers with a 5 per cent deposit to get an interest-free loan for 40 per cent of the purchase price, topped up with a mortgage of 55 per cent.
Help to Buy has been hugely successful across the country but hasn’t had such a big impact in the capital because property prices are that much higher. Offering a 40 per cent interest-free loan to London buyers will make a huge difference, enabling many to get on the housing ladder when they simply couldn’t before.
Take the example of a one-bed flat in Camberwell on the market at £360,000. A 5 per cent deposit works out at £18,000 but if you don’t buy via Help to Buy, you then need to raise a mortgage for the remainder, which requires earnings of circa £85,000, pricing out many buyers. Under London Help to Buy, a 40 per cent interest-free loan would be available, leaving you with a mortgage of just £198,000 to raise. This could be done with an income of £50,000, which is much more achievable in the capital.