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How London Help to Buy might work for Pocket buyers

Announced in the government’s Spending Review yesterday, ‘London Help to Buy‘ is a punchy new addition to the Help to Buy family.  And now that we’ve got our heads around how the Help to Buy equity loan works in principle, we can easily understand the London version. When coupled with the government’s commitment to create 200,000 starter homes, things should be easier for first time buyer in London, which is great news.

In simple terms, from early 2016 first time buyers in London will be able to borrow up to 40% of a new property’s value from the government, interest free for five years.  This means that buyers will need to raise a smaller mortgage, which will open the market up to more people on lower incomes. Pocket hope this will help even more first time buyers to get a foot on the property ladder.

 

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An example house value of £400,000 is broken down above. So looking pretty good but still out of the reach of many with this high a house price… how could this work with Pocket?

 

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With Pocket, the sale price would be around £240,000 for a compact one bedroom apartment which would have at least a 20% discount (the price & depth of discount can vary depending on the area).  A 5% deposit is £12,000 (which you could save in under four years from a standing start with the Help to Buy ISA, launching on 1st December 2015, by the way).  The London Help to Buy loan element would be £96,000, leaving just £132,000 to raise as a mortgage, which would be available to someone with a of household income of under £35,000.  This starts to price in an even greater proportion of our database of around 20,000 hopeful first time buyers.  Good news for them!

 

Of course the London Help to Buy scheme has only just been announced, and there will be lots of debate around the effects it will have on London’s housing market in the longer term, understanding how it will work with the starter home initiative, and confirmation of the finer details of the scheme…  but taken at face value, and in the context of Pocket homes, we can only be pleased to see that it will allow even more city makers (like Georgie and Mike) the chance to get their foot on the housing ladder.

 

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