Will introducing 'Help to Buy' in Scotland take us down the route of another housing bubble?
The controversy surrounding the Help to Buy Scheme south of the border has not prevented a similar government-backed scheme being introduced in Scotland. The Scottish Government announced investment of ?220m over three years to provide financial assistance to eligible homebuyers in what it has described as a ?game changing initiative? for the housing industry.
The Help to Buy scheme, which has the support of the Council of Mortgage Lenders and Homes for Scotland, will be available for purchases of new-build properties up to ?400,000 in value from participating homebuilders. The scheme will not be limited to first-time buyers, but any property purchased must be the buyer?s only residence and they must not own another home.
Through the scheme the Scottish Government will provide purchasers with an equity loan of up to 20% of the price of the property, with the remaining 80% funded by the purchaser?s deposit and mortgage. The Government?s interest in the property will be protected by way of a standard security, which will be discharged at the point the property is sold or when the equity loan is repaid (whichever is earlier). It is expected that most banks and building societies will participate in the scheme, although it is the state-owned Royal Bank of Scotland and Lloyds Banking Group who have been actively involved from the start in England.
Detailed guidance has been produced by the Scottish Government that will allow individuals to assess whether or not they will be eligible for support from Help to Buy Scotland. It is an essential condition of the scheme that individuals speak with an independent financial adviser before they make an application.
Any investment in housing is to be welcomed and homebuilders and prospective purchasers will, no doubt, be delighted that the Scottish government has followed Westminster in introducing a variation of Help to Buy. It is hoped that the scheme will be successful in allowing individuals who may otherwise have been unable to get onto the property ladder to do so and does not simply inflate the property market as some critics of the English equivalent fear. We will certainly be following the success of the scheme over the next three years with interest.
If you are looking for advice regarding the purchase of a residential property, through the Help to Buy scheme or otherwise, our property department would be delighted to help.