New Help to Buy scheme launches: what it means for your house purchase

As lenders have withdrawn low deposit mortgages amid the economic chaos unleashed by the pandemic, Help to Buy has become even more vital in the battle to get on the housing ladder.

However, new rules have limited the number of people who can use the Government scheme.

As before, 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, users will only be able to purchase homes worth less than the average property price in their region. First-time buyers will also be excluded. 

What is happening to Help to Buy?

The new Help to Buy scheme has officially launched, replacing the previous version of the scheme which has run since 2013. The scheme has been accused of pushing up house prices and boosting builders’ profits, rather than helping ordinary buyers, but has proved highly popular.

As of April 2021 regional price caps now apply and the scheme has been restricted to first-time buyers, with the entire scheme due to end in 2023.

Homes England, which runs the scheme, has allowed applications for the new Help to Buy equity loan scheme since December 16 but users can now get the keys to their new homes and officially complete their purchases.

Buyers using the previous iteration of the scheme have until the end of May 2021 to complete their purchases, after the Government allowed a short extension to cover coronavirus-related delays to purchases.

What do the changes mean for me?

Those using the Help to Buy equity loan scheme to purchase a home must now 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.

An investigation by Telegraph Money in 2018 found multiple two-bedroom Help to Buy flats for sale in Stratford-upon-Avon priced at more than the £255,600 cap applied across the West Midlands. 

Would-be buyers in Northampton would be unable to purchase average priced semi-detached family homes as they are typically more expensive than the £261,900 limit in the East Midlands.

Ordinary buyers in other towns such as Cambridge, Harrogate, Warwick and York could also be excluded from the scheme.

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