As lenders have withdrawn low deposit mortgages amid the economic chaos unleashed by the pandemic, Help to Buy has become even more vital in the battle to get on the housing ladder.
Buyers need a 5pc deposit to take part in the scheme, with the Government offering a loan worth 20pc of the purchase price, which is interest-free for five years. The remaining 75pc is obtained from a traditional mortgage lender.
However, the scheme has been accused of pushing up house prices and boosting builders’ profits, rather than helping ordinary buyers.
What is happening to Help to Buy?
Help to Buy is due to change soon: from April 2021, there will be regional price caps applied and it will be restricted to first-time buyers, with the scheme ending in 2023.
But the Government is considering scrapping these new rules that would limit its scope, and instead may seek to extend the scheme in its current form to support developers and prospective house buyers.
Many developments have been delayed due to the pandemic. This could mean the scheme would be curtailed by the time these new-builds come to market, denting housebuilders’ profits and limiting the number of people who could buy the homes.
Craig Hall of Legal & General mortgage brokers said: “An extension of the current rules will also help to support the growing demand for Help to Buy from those with smaller deposits who now face a much more limited choice of high loan-to-value mortgages.”
What do the changes mean for me?
As the situation stands, from April 2021, those using the Help to Buy equity loan scheme to purchase a home must be first-time buyers. They must also buy a house which is worth less than the average house price in their region.
For instance, a buyer in the North East would need to purchase a home for less than £186,100. Those in the South East face a £437,600 price cap.
However, as price caps are regional, this will create the potential for buyers to be excluded because they live in an expensive part of their region.