More than 240,000 first-time buyers have bought a home using the government’s Help to Buy scheme, but will its upcoming overhaul prove to be a help or a hindrance for people looking to get on to the property ladder?
From April, the government will introduce price caps on its long-running housing scheme, but critics have suggested these could affect the number of Help to Buy homes built and sold in the future.
Here, Which? analyses the upcoming changes to Help to Buy and explains how to apply to buy a home using the scheme.
What is Help to Buy?
The government launched the Help to Buy equity loan scheme in April 2013.
It allows first-time buyers and home movers in England to benefit from a 20% equity loan (40% in London) on a new-build home, allowing them to buy with a 5% deposit. Equity loans are provided interest-free for five years.
So far, 291,903 homes have been bought using Help to Buy, with 240,083 (82%) going to first-time buyers. But the scheme is set to be overhauled from 1 April.
What’s changing from April?
From 1 April, the Help to Buy scheme will be restricted to first-time buyers only, and regional price caps will be put in place to limit how much homes can be sold for.
These caps are set at 1.5 times the average price paid by first-time buyers in each region, as of Autumn 2018. The maximum prices are as follows:
|Yorkshire & The Humber||£228,100|
|East of England||£407,400|
Why is Help to Buy being overhauled?
There have long been concerns over the prices of homes sold under the Help to Buy scheme, which have soared since its inception in 2013.
Last year, Which? revealed that more than 5,000 Help to Buy properties had been resold at a loss, despite overall house prices rising significantly during the same period.
The scheme has also been accused of boosting the borrowing power of people who could have afforded to buy a home on the open market, rather than prioritising those who needed extra help.
The government’s most recent data shows that 30% of Help to Buy users to date have had an average household income of £60,000 or more, with 12% having incomes of more than £80,000.
Will developers build homes under the new scheme?
When the government announced the upcoming price caps in Autumn 2018, it faced criticism for setting the figures more than two years before they would come into force.
Developers and estate agents expressed concerns that if house prices rose significantly in the interim, this would then affect the number of homes built under the new version of the scheme.
As it happens, prices haven’t soared in the last couple of years, and caps set in 2018 remain well above the average prices paid by first-time buyers in all regions, as shown in the chart below.
To date, there are no signs that the biggest house builders will shy away from the new version of Help to Buy.
We visited the websites of the five developers with the most Help to Buy sales (according to a report by the National Audit Office) and found that Persimmon, Barratt, Taylor Wimpey, Bellway and Redrow were all already advertising homes to be sold under the new scheme.
How do I find a Help to Buy home?
There are a number of ways you can find Help to Buy properties in your area.
- Help to Buy Agents: you can search for a Help to Buy property on the website of your regional Help to Buy agent. The government provides details of how to find your nearest agent online.
- Property portals: the biggest property portals can be hit and miss when it comes to Help to Buy. Rightmove allows you to limit your search to new homes, but you’ll then need to look at individual listings to see if they are available on the scheme. Zoopla works similarly. The specialist new-build portal Share to Buy allows you to filter your search exclusively to Help to Buy homes, as does What House?.
- Developers: one of the easiest ways to find a Help to Buy home is by looking on the websites of some of the biggest developers. Developer websites allow you to search by postcode for your nearest development and may contain more information about specific properties or plots than you’ll find on a portal.
- Estate agents: high-street estate agents sometimes include new-build homes on their listings, if they have a partnership with the developer in question. This isn’t commonplace, however, so you may find the other options more fruitful.
Can I already apply for the new scheme?
Applications for the new iteration of Help to Buy opened on 16 December, meaning it’s already possible to reserve a new home under the scheme – though you won’t be able to complete and move in before 1 April.
You can find full step-by-step details of how to apply for Help to Buy in our story from December.
Alternatives to Help to Buy
Help to Buy has been incredibly popular over the last eight years, but there are some other options available for first-time buyers.
- 90% mortgage: if you can save a 10% deposit, a traditional mortgage will allow you to look at existing as well as new-build properties, and may also cost you less in the long run.
- Shared ownership: these schemes allow you to buy a share in a property (from 25% upwards) and pay rent on the remainder. Shared ownership schemes can help you get on to the ladder if you live in an expensive area, but the combined cost of the mortgage, rent and service charge can add up.
- Guarantor mortgages: these mortgages allow parents to use either their savings or their property as collateral for their child’s mortgage. Find out about the different types in our full guide.
Help to Buy around the UK
Until recently, Help to Buy schemes were in operation in both Scotland and Wales.
Help to Buy Wales is still in operation. It offers a 20% equity loan to first-time buyers and home movers buying new-build properties priced up to £300,000. Find out more in our full guide to Help to Buy Wales.