Options for aspiring new build buyers
By Pete Dockar, Commercial Director at Gen H
The market today is undoubtedly more turbulent than we’ve seen in the recent past. The increased cost of living, rising interest rates and a continued shortage of housing stock will certainly impact the market of 2023 as prospective buyers continue to defer home purchases.
Even the more upbeat forecasters predict there’ll be just over 1.1 million house purchases in 2023, which would be a decrease of over 10% year on year.[1] Anecdotally, there is concern that this downward trend will be even more pronounced among those looking to buy new build homes – which is even more worrying, given the UK's critical need for more affordable, energy-efficient and environmentally-friendly housing.
The cause of this trend may partially be linked with the closure of the government-backed Help to Buy scheme. Between April 2013 and June 2022, 369,104[2] properties were bought with an equity loan – bringing the total value of properties sold under the scheme to £103.2 billion.[3] These numbers demonstrate that, despite its faults, the Help to Buy scheme did make a difference for thousands of families. This begs the question: what are aspiring buyers to do now?
We’ve seen several temporary solutions emerge. We've seen house builders put their own money on the table to support the market, with incentives like money towards buyers’ deposits, mortgage-free move-in months and dedicated discounts for key workers.
The market is in need of a permanent solution that addresses the challenges facing buyers today. Chief among these hurdles is, of course, the near-impossibility of amassing the required deposit in today’s harsh economic conditions.
One potential solution comes with Gen H’s innovative and flexible deposit booster mortgage proposition. With a deposit booster mortgage, the buyer’s friends or family can contribute up to 100% of a buyer’s deposit as a gift, an interest-free loan, or an equity loan.
Unlike conventional Bank of Mum and Dad deposit support, the deposit booster’s contribution doesn’t have to be gifted, and is protected by the Gen H mortgage charge. This means that the contribution will always be ring fenced, even in the event of equity release or sale down the line.
As Gen H is a digital lender, the equity stake can be monitored and managed online in real time. And since the introduction of deposit boosters at Gen H, we’ve seen that this added security and certainty has meant parents often provide up to twice as much support as they would with a conventional gift.
It’s like a DIY Help to Buy. This could be just the kind of boost buyers, builders and the housing market need.
If you have any questions, visit: generationhome.com/intermediaries, call our BDM team on 07723 954 895 or email us at: broker@generationhome.com
[1] http://www.imla.org.uk/resources/publications/the-new-normal-prospects-for-2022-and-2023.pdf
[2]https://www.gov.uk/government/statistics/help-to-buy-equity-loan-scheme-data-to-30-june-2022/help-to-buy-equity-loan-scheme-data-to-30-june-2022
[3]https://www.gov.uk/government/statistics/help-to-buy-equity-loan-scheme-data-to-30-june-2022/help-to-buy-equity-loan-scheme-data-to-30-june-2022
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