Could this be the end of Help to Buy?
What is Help to Buy?
Help to Buy is a Government scheme introduced in 2013, which allows people to purchase property with a deposit as low as 5%. The aim is to make home ownership more affordable especially for those who would otherwise struggle to get on the property ladder.
There are currently 2 options available under Help to Buy:
- Shared Ownership
The Help to Buy Shared Ownership Scheme is for people who don’t currently own a house and are looking to buy either their first home or are an existing shared owner looking to move. This scheme is on a part buy part rent basis. Here you would buy a share (25%-75%) of a house from a housing association which could be mortgaged or bought in cash. In addition to a mortgage, you will pay the housing association a subsidised rent for the remaining share. Additional shares can be bought in stages until you own the property.
- Equity Loan
Under the equity loan help to buy scheme, the government lends you up to 20% of the cost of a new build and you will need to foot a 5% cash deposit and a 75% mortgage to make up the shortfall. To reflect the higher prices in Greater London, the upper limit is 40%.
The Help to Buy equity loan scheme has helped over 100,000 people buy their first home. The scheme has contributed to house builders selling over 30% of their property stock this way.
There are no charges on the Government loan for the first 5 years of the owning the house. The equity loan will have to be paid back at the end of the mortgage term or when the house is sold.
Equity loans are available to homeowners looking to buy a new build property up to £600,000. If you are an existing homeowner, you need to sell your property too, as you cannot own multiple properties if you are using this scheme. There is no income cap for applicants meaning that anyone fitting these criteria can apply.
The Future of Help to Buy?
Currently, the Government is looking at either scrapping the Help to Buy scheme altogether or to introduce a tapering system which would be the preferred option for house builders.
If the scheme was to be scrapped, it could severely affect buyers who would not otherwise be able to buy a home. This could have a knock-on effect on home builders wishing to offload stock.
We don’t currently know what is going to happen with the Help to Buy Scheme. However, if you are a homeowner looking to utilise this scheme, we’d recommend you do this sooner rather than later.