The Mayor of London, Sadiq Khan, is pressing the Government for immediate relief for London homeowners as he warned of a worsening mortgage crisis in the Capital.
He calls for a freeze on payments for the Government’s Help to Buy scheme as a new City Hall analysis indicates that up to 4,500 London homeowners are financially strained due to increasing mortgage interest rates and ending Help to Buy loan grace periods.
The analysis suggests that some homeowners could face an increase in their monthly bills by up to £900. This comprises £638 in higher mortgage interest and £275 in Help to Buy payments.
“People in London using Help to Buy may be on the housing ladder, but many are on low pay and facing growing levels of economic insecurity,” said Khan. “As Help to Buy grace periods come to an end and mortgage rates continue to rise, thousands of London’s recent first-time buyers are facing huge increased in their monthly payments.”
He further proposed that by introducing a payment holiday on Help to Buy loans, Londoners could save an average of £3,300 a year. These savings could then be reallocated to other essential spending areas such as rising food, gas, electricity, fuel, and other mortgage costs.
The Mayor’s call to action comes on the heels of a report from the Joseph Rowntree Foundation that identified first-time buyers in London, especially those who have used Help to Buy, as being highly vulnerable to rising mortgage rates.
The Help to Buy scheme was initially created to assist first-time buyers with only a 5% down payment on a new-build home. In London, the scheme allows first-time buyers to borrow up to 40% of the home’s purchase price interest-free for the first five years.
“Ministers could do something to support these households straight away, by suspending or freezing Help to Buy loan payments, giving people breathing space when they need it most,” Khan said.
In response to the Mayor’s comments, Paula Higgins, chief executive of HomeOwners Alliance, said: “The Government can’t hang vulnerable new homeowners out to dry. Homebuyers that purchased through the Help to Buy scheme are facing a barrage of soaring costs.
“Freezing the loan payments as the Mayor suggests could have a significant impact on desperate household budgets at this time.”
