House price rises block more first-timers from Help to Buy

Tens of thousands of new homes will become ineligible for the Help to Buy scheme once new price caps take effect next month.

After a year of price surges across the country, thousands more properties are now expected to be priced out of the first-time buyer market reliant on the government scheme.

Under rules coming into force from April, the equity loan scheme in England will apply exclusively to firsttime buyers. These home buyers will also be restricted to new-builds worth less than the average house price in their region, under newly introduced price caps.

Strong recent house price growth means 5,000 fewer new home sales will now be eligible under the scheme than previously thought, according to estate agents Hamptons. This figure is compared with if caps had been introduced a year ago.

Research by the company suggested the incoming restrictions meant 33pc of new homes sold each year, equivalent to 36,000 sales, would be priced out of the scheme.

David Fell, of Hamptons, said forecasts of house prices rising further over the next two years meant fewer new homes qualifying for Help to Buy. “But given that first-time buyers tend to purchase smaller and cheaper new homes, price caps cutting out larger, more expensive homes is unlikely to make much of a difference to take-up rates,” he added.

The scheme, which is set to come to an end in 2023, has been accused of pushing up house prices and boosting builders’ profits, rather than benefiting the buyers it was intended to help.

Buyers need a 5pc deposit to take part in the scheme, with the Government offering a loan worth 20pc of the purchase price and promising an interestfree deal for five years.

Help to Buy has been used by more than 300,000 buyers since its inception in 2013, with first-time buyers accounting for 82pc of sales. However, property website Zoopla said the incoming reforms could potentially halve the number of homes available.

Last year, 32,000 new-build homes were sold for less than the original Help to Buy price cap of £600,000 in England. But according to Zoopla, about 14,000 of these sales, or 43pc, would now be too expensive to qualify under the new price caps next month.

Some cities will fall foul of the incoming caps, with average prices in the area too high to buy using the scheme. Average prices in York, at £ 300,201, and Ripon, at £270,993, sit well above the regional price cap of £228,100 allowed in Yorkshire and the Humber under the scheme. Likewise, first-time buyers in Bath, where average prices are more than £533,000, according to property site Rightmove, will struggle to purchase a property under the regional cap of £349,000 for the South West.

York is one of the cities where regional price restrictions will hit buyers using the government scheme