Government Help To Buy Scheme Set To Boost
Almost 40% of tenants trying to escape being part of Generation Rent could become homebuyers when the Governments 95% Help to Buy scheme is implemented in January 2014.
New research released by Rightmove found that very few trapped renters, tenants who would like to buy but can’t afford to, are currently saving for a deposit.
39% of tenants feel they will never be able to become property owners unless they strike it rich, which Rightmove reckon could come in the form of the Government’s Help to Buy scheme, which will enable people with only a 5% deposit to get on the housing ladder.
The research, conducted among 3,214 current private rental sector (PRS) tenants, last month, between April 9th and April 25th, shows that while 42% of trapped tenants are trying to save for a deposit, currently less than 10% of tenants are on course to meet their deposit goal , with the majority not in a position to start saving.
The reason is simple: paying the rent accounts for 37% of a tenants’ take home pay on average, and for at least 50% of take-home pay for 27% of tenants.
According to the Rightmove survey, 58% of current tenants feel trapped into the rental lifestyle. Of those who are currently saving towards deposits, the average savings represent just 11% of tenant’s take-home pay.
When asked to evaluate how their saving efforts were going, only 8% current savers stated they were on course to meet their target deposit, while 40% said they could only afford to save a little each month but would get there eventually.
A further 39% of tenants said that as they weren’t able to put enough away, they would ‘need a windfall’ in order to reach their deposit goal.
Rightmove director Miles Shipside said that its findings “Underscore the need for assistance to overcome mortgage lenders’ deposit hurdles, something that the Government’s new Help to Buy scheme appears to offer. Demanding deposit hurdles have made the transition from tenant to first-time buyer challenging for many in recent years. Those who expect to make that move this year tell us that they’ve been working towards a deposit goal of £20,000, rising to £30,000 for those in London – figures that must seem daunting to even the most frugal tenant. Even for those who’ve been diligently saving, many are still left hoping that their lottery numbers come up or the Bank of Mum and Dad proves less picky with its lending than the High Street banks. However, the Government’s proposed new Help to Buy scheme could yet prove to be a ‘virtual windfall’ by lowering the deposit hurdle to 5%, providing much-needed assistance and motivation for Generation Rent.”
According to the Rightmove survey, 33% of all trapped renters said that home ownership is a priority.
Help to Buy will introduce 95% mortgages on all private residential properties, old and new, with the loans underwritten by a mortgage guarantee. The scheme is due to start on January 1st 2014.
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