Top seven stories this week in housing and investment: 18 January

New Help to Buy scheme is opening to first-time buyers

From 16 December 2020, first-time buyers can start applying for the new Help to Buy scheme. This could help more first-time buyers struggling to step onto the property ladder.

The new Help to Buy scheme is opening this month for first-time buyers in England. Eligible buyers will be able to reserve a new-build home though the scheme from mid-December and can receive the keys to move in as early as 1 April 2021. The scheme will be only open to first-time buyers and will run for two years.

Housing Secretary Robert Jenrick says: “The Government is providing more ways to help families onto the housing ladder, and provide that life-changing moment when you get the keys to your own home.

“Alongside First Homes, Shared Ownership and our £12bn investment in affordable housing, our new Help to Buy scheme will help thousands more families take their first step into a home of their own”

What is the Help to Buy scheme?

Help to Buy aims to assist buyers of new-build properties who are struggling to save up for a deposit. Through the scheme, buyers need to pay a cash deposit of only 5%. A lender provides a 75% loan to value (LTV) mortgage. And the government lends buyers up to 20% (40% in London) of the cost of the home for the shortfall.

As with the existing and new scheme, buyers don’t pay interest on the loan for the first five years. After that, fees start at 1.75%. With the new scheme, new prices caps will also apply depending on region. The price caps are 1.5 times the average first-time buyer price in each region.

The benefits of buying through the scheme

The Help to Buy scheme is only available on qualifying new-build properties. While the number of new houses being built across the UK continues to climb, this government scheme has helped many homebuyers purchase these homes and experience the benefits of living in a new-build property.

Additionally, under the new scheme, homebuilders selling Help to Buy homes are required to comply with more stringent conditions. This will drive quality and consistent building standards. Homebuilders must also give buyers a new home warranty before completion, providing these first-time buyers with peace of mind.

Support for first-time buyers when they need it most

The Help to Buy scheme originally launched in 2013. It has helped over 270,000 people step onto the property ladder. While at present Help to Buy is available to home-movers as well as first-time buyers, 82% of the people who have used the scheme have been first-time buyers.

The new changes to the scheme could be particularly beneficial as many first-time buyers are struggling to get on the property ladder. A Zoopla report recently showed that the proportion of first-time buyers is now decreasing. This is due to numerous factors, including financial instability linked to COVID-19 and job uncertainty and the current mortgage market.

Lenders have pulled a number of high LTV mortgages, making it more challenging for first-time buyers to save up enough for a deposit. More mortgage options are becoming available, but the market still isn’t at pre-COVID levels. Additionally, mortgage fees and interest rates are back on the rise.

Will German, director of Help to Buy at Homes England, comments: “We’re pleased we can help homebuyers with smaller deposits to own a home, at a time where there are fewer options open to them.

The new Help to Buy scheme will likely lead to greater uptake by first-time buyers. With the regional price cap in place, many buyers are expected to be attracted even more to cheaper areas of the UK. For example, in the north of England and Midlands, deposits usually stretch further.

To find out if you’re eligible for the new Help to Buy scheme and how to apply, read the recently published homebuyers guide.

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