The current Help to Buy scheme, which was first launched in 2013, is changing at the end of this financial year, and with it will see a number of new measures which will restrict the use of the property purchase scheme.
In essence, how Help to Buy works will remain the same: you, as a buyer of a newly built property, save a deposit worth 5% of the property’s full market value.
The government then supplies you with an equity loan worth 20% of the value, leaving you to secure a mortgage on the remaining 75%.
In London, the equity loan increases to 40%, meaning the mortgage to be secured is only 55% of the value of the property. The aim of the scheme is to make lending more affordable, as you’re securing a small loan.
When will the current scheme end?
The current scheme is ending on 31 March 2021 but closed to applicants on 15 December 2020. This scheme allowed clients to apply who were both first-time buyers and next-time buyers providing that the new purchase would be the only property the clients owned upon completion.
I am mid-way through purchasing a new build which might not be complete before 31 March. Am I going to miss out?
Fortunately, the government has extended the deadline for those who have applied but whose properties won’t be ready in time.
These buyers now have until 31 May 2021 which gives housebuilders an extra two months to ensure that any new build properties are ready in time.
When does the new scheme start?
The new scheme starts straight after the end of the old scheme on 1 April 2021. Those interested have been able to apply since 16th December 2020, allowing for property completions from April 2021 onwards.
What is different about the new scheme?
The new Help to Buy scheme will have some small changes to the application criteria:
- The new scheme will only be available to first-time buyers, meaning if you are applying with another person, you must both be making your first ever property purchase
- If you are married, both you and your spouse must be on the application
- Ground rent on any leasehold properties in the scheme cannot be any more than peppercorn ground rent. Previously ground rent could be anything up to approximately £400 per year
- There are now regional price caps, based on an average purchase price in that region. Previously the price cap across the whole of the UK was £600,000, now this varies from region to region, with only London remaining at £600,000.
| Region | Maximum property price |
| North East England | £186,100 |
| North West England | £224,400 |
| Yorkshire and the Humber | £228,100 |
| East Midlands | £261,900 |
| West Midlands | £255,600 |
| East of England | £407,400 |
| London | £600,000 |
| South East | £437,600 |
| South West | £349,000 |
What does this mean for potential buyers?
If buyers are purchasing as a couple, they will only be eligible to apply if they are both first-time buyers.
This means lots of buyers will have to look at other options such as Shared Ownership, which will see an increase in demand for this group of purchasers following the changes on the Help to Buy criteria.
Buyers may also be affected by the change in price caps, meaning they are slightly more restricted as to the properties they can purchase outside of London.
Conclusion
Even with the changes, the government’s Help to Buy scheme is a fantastic option for many, allowing lots of buyers to purchase their dream homes.
And for those who are now unable to apply, there are plenty of other purchasing routes to explore such as Shared Ownership.
Matt Coulson is director and principal at Heron Financial
