Hindrance to Buy: price cap rules out third of newbuilds
Forthcoming changes to Help to Buy will leave first-time buyers in popular locations high and dry. Adam Williams investigates
Struggling first-time buyers who rely on a crucial government scheme to get on the property ladder will face severe restrictions from 2021, following changes announced by the Chancellor. On Monday Philip Hammond extended the flagship Help to Buy “equity loan” scheme to 2023 but introduced price caps that will leave buyers in regional capitals and popular towns unable to take part.
Launched in April 2013, the scheme has helped 169,102 people in England to buy a home by offering a government loan worth 20pc of the price of a newbuild property. The buyer contributes a 5pc deposit while the remaining 75pc is obtained from a traditional mortgage lender.
However, from April 2021 those who use the scheme outside London will face regional price caps, which will heavily restrict their choice of properties. Telegraph Money has identified numerous towns and cities where first-time buyer flats and modest family homes will be priced out of the scheme. Price caps will vary from one region to another, from £186,100 in the North East to £437,600 in the South East. Yet prices of many existing Help to Buy properties are already above the new limits.
This newspaper found two-bedroom Help to Buy flats for sale in Stratfordupon-Avon priced at more than the £255,600 West Midlands cap. In Northampton some semi-detached family homes will be barred from the scheme when a £261,900 limit is introduced for the East Midlands.
Would-be buyers in Harrogate will see many homes put out of reach by the £228,100 Yorkshire cap, while those looking to buy flats in Cambridge will struggle against the East of England’s £407,400 limit.
Analysis conducted by housing research consultancy BuiltPlace for Telegraph Money showed that more than a third of all newbuild properties in each of these areas would be ineligible for Help to Buy once price caps were implemented. Buyers in Cheshire, North Tyneside, Warwick and York are also likely to see their options limited, the firm said.
Jo and James Druce-Harding, both 27, recently used Help to Buy to purchase a four-bedroom home in Ducklington, Oxfordshire. The couple paid £575,000 to Deanfield Homes for the newbuild property, something that others will soon be blocked from doing. “I’m so glad we were able to move when we did,” said Mrs DruceHarding, an accountant. “If caps were
Mr Boulger suggested that a fairer way to phase out the scheme would have been to limit the government loan to 10pc of the purchase price. This would prevent people from buying unnecessarily large houses. “Changes were needed but they have made the wrong ones,” he said. “They’ve just made it more difficult for buyers in places like Cambridge.”
A government report released on the same day as the Budget claimed that Help to Buy was “generally well targeted” and found that almost half of all purchases were family homes.
However, mortgage lenders expressed concern that consumers were unaware of the ongoing obligations of Help to Buy. After five years the equity loan, initially interest-free, starts to incur interest and the Government will take a share of any increase in a property’s price when the owner comes to sell. Other lenders said their customers were not aware that they might have limited options if they tried to remortgage.
Mr Hammond will also restrict the scheme to first-time buyers from 2021, but Mr Boulger said this too was damaging. He said owners in negative equity could use Help to Buy to escape their predicament but this lifeline would be removed if only first-time buyers were eligible.
Buyers in towns such as Stratford-uponAvon will see their choices limited