Help to Buy has new regional price caps to help first-time buyers

It’s become more difficult for first-time buyers to get their foot onto the property ladder. The new Help to Buy scheme and additional homebuyer support could help more people purchase their first home.

The new Help to Buy scheme began on 1 April 2021. The scheme is only available to first-time buyers purchasing new-build properties valued within the regional price caps. The caps are the average house price in each region.

Through the scheme, buyers put down a cash deposit of only 5%. The government offers a loan worth up to 20% of the purchase price. This loan is interest-free for five years. Then, the remaining 75% is obtained from a traditional mortgage lender.

House price growth has made it difficult for some to get their first step onto the property ladder. The strong growth in prices over the past year has meant approximately 5,000 fewer new home sales each year will be eligible for the price caps with the Help to Buy scheme, according to data from Hamptons.

However, this is not expected to have a significant impact on up-take of the scheme as first-time buyers typically purchase smaller and cheaper homes. Certain areas will benefit more from the scheme as specific areas of a region could have much lower prices than the average price found in the region.

New-builds eligible for Help to Buy

Recently released data from Buildscan, a snagging and defect management app, revealed the new Help to Buy scheme could help over half of all new-build homebuyers get their foot on the property ladder.

The figures show that 32,158 new-build home sales completed in England and Wales during last year. This accounted for about 7% of all residential transactions. Of these, 17,724 would have fallen into the new Help to Buy price caps for the respective region. This means 55% of these new-build sales would have qualified for the new scheme.

Harry Yates, founder and managing director of BuildScan, comments: “We’ve seen several Help to Buy schemes implemented by the government now, and while they have their critics, you have to give credit where it’s due in terms of the sheer number of people it has helped onto the ladder.

“It certainly seems as though this latest version will do the same, with more than half of new-build homebuyers due to fall within their respective regional equity loan price caps.”

With additional savings from the stamp duty holiday, it could be a particularly beneficial time for first-time buyers. However, many are recommending first-time buyers to act soon as there is a limited level of stock. Additionally, as more homebuyers look to purchase new-builds, property values could increase.

Additional support for homebuyers with smaller deposits

For homebuyers, the 95% mortgage guarantee scheme can provide additional support and allow first-time buyers to broaden their search. The guarantee scheme is open to homebuyers purchasing properties up to the value of £600,000. This scheme is not just for first-time buyers, and purchases can be for new-builds or older properties.

The Help to Buy and mortgage guarantee schemes are especially beneficial for those with smaller deposits. It’s particularly helpful as lenders had withdrawn low deposit mortgages amid the uncertainty surrounding the COVID-19 pandemic.

Applications have been open for the new Help to Buy scheme since 16 December 2020. And the scheme will end in 2023. This support for homebuyers, paired with the tapering end to the stamp duty holiday, could cause more homeowners to be attracted to cheaper areas of the UK. The north of England and Midlands may be of particular interest, where buyers’ deposits can stretch further.

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