Mortgage repayments are cheaper than renting for first-time buyers using HTB scheme

First-time buyers who have used the Government’s Help to Buy mortgage guarantee scheme are spending £180 less per year on repaying their mortgage than if they were renting. 

According to new data from Mortgage Advice Bureau, the average price of a property bought using the scheme was £153,447 in March.

Data from shows that, based on a 95 per cent loan on the average Help to Buy 2 property price, the typical monthly mortgage repayment for a borrower in their first year would be £753 (or £9,036 annually)*.

In comparison, the average rent across England and Wales now stands at £768 per month**. This means that Help to Buy 2 applicants could save £180 annually by paying for a Help to Buy 2 mortgage instead of renting – as well as paying off debt on their own home rather than for a rented property.

The average Help to Buy 2 property price is £78,681 or 34 per cent less expensive than the average purchase price in the wider market (£232,127).

Brian Murphy, Head of Lending at Mortgage Advice Bureau comments:

“The first-time buyer stamp duty announcement by the Labour Party was the latest salvo in the general election to court the vote of potential first-time buyers.

“Whatever policies we end up with after the election, our data shows that the mortgage guarantee scheme has worked: it has got first-time buyers onto the housing ladder and it has saved them money compared to renting.

“The scheme has also been a success in that it is being used by the people it was meant to help. When it launched, there was a concern that more affluent borrowers would take advantage of the scheme to purchase expensive homes.

“However, it’s clear that the scheme is being used by first-time buyers to purchase affordable properties well within their price range.

“As a result, average Help to Buy mortgage repayments are broadly in line with renting, making homeownership look far more affordable.

“While the scheme is expected to operate until 2020, lenders need to ensure there isn’t a gaping hole in the market when the scheme comes to an end.

Otherwise, borrowers with smaller deposits could find themselves locked out of home ownership.”

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