Posted by John Yerou
on April 1st, 2013 06:00am in
Last Updated on February 10th, 2019 15:09pm.
The EU’s human rights rules could have a knock on effect to UK housing. Under them, it’s likely that the Help-to-Buy scheme will help foreign EU and non-EU residents buy a home in the UK.
The Help-to-Buy scheme in itself is the shot in the arm the depressed housing market needs. Through it, lenders would offer mortgages subsidised by the Government.
For one, it would make the housing market more accessible to first time buyers. It would also help younger/lower-income Brits with 5% deposits buy a home.
But, under EU rules, the UK can’t confine this type of mortgage lending to its indigenous citizens. People both inside and outside the Eurozone will have equal access to Help-to-Buy.
For contractors in the UK on an immigrant VISA, this move will be a bonus. For years, there’s been no specific mortgage for immigrants in the UK. The Help-to-buy equity loan mortgage could be the missing part to their puzzle.
What’s the bigger legal picture (there’s always one, right?)?
Barring foreign nationals from taking advantage of Help-to-Buy would be problematic to impossible. That’s according to housing industry and legal experts.
They envision that preventing access could also impair the free movement of labour.
Using immigrants’ zero contribution to the UK tax system as a reason is also a non-starter.
As part of the EU, the UK offers free movement across member states. So, refusing mortgages for immigrants on tax grounds wouldn’t stand up in court in Brussels.
At the same time, UK anti-immigration activists are up in arms over the scheme. MigrationWatch’s Sir Andrew Green didn’t waste time weighing in. He’s demanding that the government amend Help to Buy.
His reasoning is simple, and not without merit. He cites the grave injustice to UK taxpayers of an overarching Help-to-Buy system.
Inviting allcomers would mean the Treasury subsidising foreign buyers of UK property. With the government insuring lenders against risk, his point seems valid.
What of the Help-to-Buy scheme itself?
Help-to-buy in and of itself has a solid foundation. The Government seems to have considered current housing and construction market woes. Re-introducing 5% mortgages on new-build homes, with government backing, is a savvy move.
But let’s not think about Help to Buy as a mortgage for new immigrants for a second. Help-to-Buy could help some 190,000 Brits get onto the property ladder every year.
With fears of a whole generation missing out on owning a home almost realised, it was time to act. And for the first time buyer with few saving, this is a respectable strategy.
How will Help-to-Buy work?
The scheme would underwrite 20% of a Help to Buy mortgage. The buyer will need a 5% deposit, then secure a mortgage for the remaining 75%.
It’s unclear which lenders will offer the scheme. The Mortgage Market Review is still sinking in, affecting lending criteria flexibility. Some lenders may be reticent about signing up for Help-to-Buy in the current climate.
Lenders brave enough to adopt the mortgage scheme will have an advantage
5% is a low barrier to entry. It could tempt first time buyers who’ve struggled to get on the property ladder in recent times. In fact, the scheme may be the lift all stakeholders in housing need to kickstart recovery.
There are worries that the scheme is open to abuse, and not only from an influx of foreigners. Some fear that there’s nothing in place to prevent investors from using Help to Buy to buy a second property.
No, avarice is not in the spirit of this new mortgage scheme. But when has the entrepreneurial world observed once regarded niceties?
We’d hope the government puts legal safeguards in place to uphold the perceived spirit of the scheme.
When all’s said and done:
- the UK housing market has flatlined;
- homebuyers are struggling to meet post-Responsible Lending criteria;
- the construction industry is dead on its feet.
Let’s face it: we’re tired of the EU putting the UK in the recovery position. It’s time we took action, and Help-to-Buy could be the cure-all. But that will depend on whether we lay the scheme’s foundations in the UK or the EU.
Addendum, March 2017
At the end of 2016, the government withdrew the Help-to-buy mortgage guarantee scheme.
The reason? Together, UK mortgage lenders offer more than thirty 5% mortgages on the High Street. This stat in itself makes the government’s bold move in 2013 a success.
Today, there are only three Help to Buy mortgages available; they are:
- Equity Loan
- Shared Ownership
Each type covers a specific buyer profile. Equity loan targets new build properties. Shared ownership works if you can’t afford a mortgage on your own, are older or have a disability. The ISA Help to Buy offers first time buyers a boost on their savings.
Due to the greater cost of housing in the capital, figures for London differ from those for the rest of the UK. The current Help to Buy programme is set to run until 2020, subject to the greater economic climate.
Author: John Yerou
John Yerou is a pioneer of contractor mortgages and owner and founder of Freelancer Financials, Contractor Mortgages®, C&F Mortgages and Self Employed Mortgages, trading styles and brands of the award-winning Mortgage Quest Ltd.