Property Blog: Is Help to Buy leading FTBs up the garden path?
Help to Buy has not only rejuvenated the property market, it has restored hope amongst first time buyers, many of whom had resigned themselves to never owning their own home. But, in her latest blog, Lynne McCaffrey debates whether these revived dreams of property ownership could actually turn into a financial nightmare.
“Though not without its critics, Help to Buy has so far had a positive impact. Latest figures have shown that the scheme is doing exactly what it says on the tin, having helped close to 13,000 homebuyers get on or move up the ladder in the last nine months.
“But not only that there’s also a buzz within the market again that we haven’t felt for quite some time; the optimism of first time buyers appearing to rub off on conveyancers and mortgage brokers alike. Well there’s certainly enough of it!
“A whopping 39 per cent of 20 – 40 years old are apparently planning to apply for a Help to Buy mortgage this year but I’m a little worried that the scheme is disguising the true extent owning a property has on your finances, therefore leaving many as ill-prepared as the English Cricket Team.
“There seems to this misconception that, because the high deposit obstacle has been overcome, applying for a Help to Buy mortgage is easier than securing a conventional mortgage, that it’s pretty much a done deal. But you still need to ‘prove your worth’ and your financial history is still put under the microscope.
“I’m not alone in my scepticism; figures from Experian demonstrate this delusion – 14% of Help to Buy applicants actually think having a good credit history is less important for Help to Buy than for a standard mortgage. Not to mention the average debt these hopefuls have - £4,600.
“The simple fact is – and it feels silly even writing this down but – buying a property is a massive financial commitment. It is not something to be rushed, underestimated or miscalculated. You may have the raised the 5 per cent deposit required under the Help to Buy scheme but are your finances equipped to deal with potentially 30 years worth of repayments? What’s your credit rating like? These are all questions any first time buyer must ask themselves before even considering buying property. If you don’t you could be making a rod for your own back. Apply too soon and you could see your application rejected, resulting in another black mark against your name. This could make it applying for future credit troublesome.
“That said I, like all other conveyancers, am not a financial expert or adviser. I am merely trying to highlight why it is so important to consider all of this before trying to jump on the ladder and not be swept away by the Help to Buy bubble.
“A financial adviser can help with this leg up and I remain steadfast in my belief that every first time buyer should at least consult with a financial professional at some point in their journey. They can explain the long term financial implications and, while never a guarantee, can check your credentials and estimate your chance of success as well as your long term sustainability.
“There’s no denying the impact of Help to Buy but in order for it to be a long term success it is important it is used by the right people, by those who are ready for everything that comes with owning property, by those who can cope when that proverbial kitchen sink is not just thrown at you but it’s blocked and leaking too.”
Lynne McCaffrey is a licensed conveyancer with over 18 years experience. As Head of Property at Goldsmith Williams Lynne is responsible for the day to day running of the property department, which specialises in conveyancing, remortgage, buy to let and bridging.
Content correct at time of publication