Hin­drance to Buy: price cap rules out third of new­builds

The Daily Telegraph - Your Money - - FRONT PAGE -

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

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