Help to Buy Gateway Closes for First-Time Buyers

Posted by Colliers on 16th February 2022 -

The amount of people buying a home through the Help to Buy scheme is at an all-time high, an incredible 83% of all completions are in fact by first-time buyers

The latest Help to Buy statistics show that in the financial year 2020-21, over 55,000 households bought their home with the support of the Help to Buy equity loan, the highest year to date levels for the scheme. Overall, the scheme has helped 339,347 households to purchase a home since it was introduced in April 2013. The value of these equity loans has reached over a whopping £20 billion, with the value of properties sold under the scheme reaching just over £94 billion.

Yet, it has been announced that on 31 March 2023 the scheme will be coming to an end.

What is the Help to Buy Scheme?

The Help to Buy equity scheme is essentially a loan, where the government lends first-time buyers in England money to buy their very own newly built home. The scheme allows first-time buyers to purchase a property with as little as a 5% deposit. There are some conditions though; the property purchased must be your main occupancy and the scheme cannot be used to buy a second home or for buy-to-let purposes.

You can borrow 20% of the purchase price, 40% in London, completely interest-free for five years. The equity loan must be repaid after 25 years, or earlier if you decide to sell your home. When the house is sold or the mortgage is paid off, you must reimburse the same percentage of the equity loan plus a share of any increase in value. For example, if you had received an equity loan for 20% of the purchase price of your home, you must repay 20% of the proceeds of the future sale. That does mean however, that if the market value of your home rises, so does the amount you owe. If the value of your home falls, unlikely in the current market, the amount you owe on your equity loan reduces too.

What is the benefit of buying a new build, compared to older properties?

People’s lifestyles are changing and there’s a real focus on wanting to be able to work from home, and for that home not to be falling down around you. 

A new build property is built with everyday living in mind, offering more space, typically open plan designs, allowing room for multifunctional use. The element of luxury is also now much more part of a new build, with extras such as a cinema room, concierge and lounges often included in high rise developments in London. Everyone in the modern-day age likes to have easy access to amenities such as swimming pools and gyms, which many new build apartment schemes offer.

Buying a new build home gives purchasers peace of mind that they’re not going to be paying any extra maintenance costs over the next few years, because there’s always a two-year snagging warranty, as well as a ten-year house builders warranty. It’s a bit like buying a new car, you pay a premium but then have very little maintenance you need to do to it for the first few years, whereas if you buy a 1930s property you might find yourself having to replace the roof or change the boiler in the next couple of years, a cost you may not have budgeted for.

New houses can also mean better security, as they often have top of the range fitted locks and CCTV, allowing residents to feel safe. Most new builds also incorporate all the latest technology such as underfloor heating and remote-controlled smart technology for things such as lighting and music.

Finally, what is better than saving the planet? New builds are more environmentally friendly, as they are constructed to exacting standards in terms of heating and ventilation. Data on EPCs shows 82% of new homes from January to March 2020, were given an A or B rating. New builds are specifically built to reduce your energy bills and offer an impressive energy efficiency, meaning you can stay warm and cosy in the winter and cool in the summer months - saving you some pennies along the way and contributing towards helping the environment too.

Another benefit is developers offer incentives such as stamp duty concessions, which make these properties even more attractive to buyers.

Why buy a new home now?

There is a real incentive in England to buy now, with the Help to Buy scheme for new builds coming to an end in April 2023, there’s going to be accelerated interest in these properties. 

Based on the recent stamp duty holiday experience, there is a likelihood that a rush of deals will be pushed through, in a hurry to be finalised before the end of the scheme. It is highly anticipated that because of this, the final remaining months of the scheme in 2023, could mean more competition and higher price bidding wars. 

What will happen post-Help to Buy?

The government currently has no plans to extend the scheme, but Housing Secretary Robert Jenrick has said that “all options are on the table” when it comes to extending, but no decision has been made yet. 

However, another opportunity for homebuyers, has been the Help to Buy ISA which was introduced in 2015, but ended in November 2019. Account holders still holding savings in their Help-to-Buy ISAs have the option claim their 25% bonus by 1 December 2030.

There is no doubt that when the Help to Buy equity loan scheme ends, there is going to be a big gap in the market. Agencies may see a fall in sales and many hopefuls dreaming of their first home may start to wonder if it will be possible for them to purchase a property in the future. The Help to Buy Scheme has considerably helped prospective first-time buyers over the last four years and has made the task of home ownership a great deal easier.