The Government’s Help to Buy scheme has been extremely successful, with a duality in its accomplishments; firstly, in encouraging people to take a step on to the property ladder and secondly, in encouraging housebuilders to develop new homes in the knowledge that they have a government-backed safety net of potential buyers, just waiting to purchase their newly-built homes. With the news from the recent Budget that the scheme which is due to end in April 2021 will be extended, albeit in a new format, by two years prospective buyers should be buoyed by the government decision.
Help to Buy will have been in existence for a decade by the time the extended period finishes and is available to first-time buyers as well as current homeowners looking to trade up on the property ladder. Essentially, the scheme provides a government-backed loan to people who want to buy a new home but cannot afford the deposit. For developments participating in the scheme, you only need a 5% deposit (ie. &10,000 for a home worth &200,000) and the government then lends 20% of the cost (topping up the deposit), with the remaining 75% consisting of a mortgage. The 20% loan from the government is also exempt from fees for the first five years of the scheme.
The extra two years of Help to Buy will be available to first-time buyers throughout the UK for houses worth up to a new regional price cap, rather than the current scheme’s cap of &600,000. As well as new regionalised limits for the equity loan, the scheme will solely be available to first-time buyers whereas currently, you do not have to be new to the property market in order to buy through the scheme – a fact which very few are aware of.
The scheme in its current guise has helped more than 300,000 people purchase a property, all of which have been new-build homes. It is this interaction between buyers and new-build homes which has helped to answer the ever-increasing demand for properties across the UK, and with the scheme forecast to end in 2023, there will surely be an impact upon the ready availability of new homes from this point onwards.
Housebuilders have had the luxury of a steady supply of buyers ready to purchase through Help to Buy who otherwise would not have been able to purchase their properties, and after 2023 there is the real possibility of a slowdown in new building projects due to the cessation of Help to Buy. Companies such as Barratt, Taylor Wimpey and Persimmon have reaped the rewards of the scheme since its introduction in 2013 with around 40% to 50% of their sales from Help to Buy homes.
For five years, potential homebuyers have been able to purchase properties which would otherwise have been outside their price range – and for first-time buyers, in particular, this has allowed a first foray into property ownership. The announcement of an extension to the length of this scheme should, therefore, encourage potential buyers to take the plunge, and allow building firms to continue to reap the rewards of a particularly lucrative sector of the property market.