The 2018 Budget contained good news for those first-time buyers looking to buy a new-build home in the next few years.
The Help to Buy scheme was an incentive introduced by the government in 2013 to help first-time buyers and boost construction in the UK housing sector. It was designed to help purchasers get on the housing ladder by providing a loan facility. It’s estimated that by April 2021 the government will have lent £22 billion to 360,000 homeowners.
How the scheme works
Under its Help to Buy scheme, the government offers both first-time buyers and second-steppers who have saved a 5% deposit, a loan of up to 20% of the price to buy a new-build property valued at up to £600,000. A London-only version of the scheme provides 40% equity loans. This means that buyers need a smaller deposit and smaller mortgage, making it a more cost-effective option.
Changes announced in the Budget
The 2018 Budget contained details of how the government’s Help to Buy scheme is to operate in the future. Until 2021, anyone taking up a Help to Buy equity loan to boost their purchasing power can buy a property worth up to £600,000. Thereafter, and for a maximum of two years, only first-time buyers will be eligible to buy through the scheme, and the maximum property values will be restricted, with price caps in place around the country. These price caps have been set at 1.5 times the average forecast first-time buy price in that area and are designed to reflect the huge regional variations in house prices across the UK.
London limits and regional price caps
After 2021, first-time buyers in London will still be able to buy properties up to the value of £600,000 using the scheme, all other regions will see the implementation of the cap on maximum prices. This means that, for instance, the maximum price for an eligible property outside London will be in the south-east, where the figure will be £437,600, and the lowest will be the north-east where the figure will be set at £186,100.
No plans to extend the scheme
The Budget documents reveal, however, that the scheme will not be extended beyond 2023: “The government does not intend to introduce a further Help to Buy: Equity Loan scheme after March 2023”, it stated.
The announcement provided welcome certainty for house-builders who are planning future developments. It also provides valuable peace of mind to potential first-time buyers who are currently saving for a deposit that they still have time to take advantage of the scheme and purchase a home of their own.