Help to Buy may be Hobson’s choice
A new Help to Buy scheme launches as many first-timers find it is the only way to buy a home. Sharon Dale reports
It is all-change with the Government’s Help to Buy equity loan scheme, which sees the state lending eligible buyers 20 per cent of the purchase price for a newbuild property on an interest free basis for the first five years.
This means only a minimum mortgage deposit of five per cent is needed.
The current version, which is open to first-time buyers, previous homeowners and homeowners looking to move, is coming to an end. It is being replaced by a new scheme announced this week.
The deadline for application for the original Help to Buy offer is December 15 and the home must be built by February 28, 2021, with the sale completed by March 31, 2021.
If you reserved your home by June 30 this year but construction has been delayed by coronavirus, the deadline is April 30, 2021, and completion of sale must be by May, 2021.
The new version of Help to
Buy officially begins on April 1, 2021 and ends in April 2023 but applications will open on December 16 this year and the equity loan will be restricted to first-time buyers only.
There are also new regional price caps. These are set at 1.5 times the average first-time buyer property price, which in Yorkshire and Humber means that the new-build home must not exceed £228,100.
Homebuilders, whose businesses have been boosted by the scheme, must comply with more stringent conditions if they want to sign up for the 2021-2023 offering.
In a drive for quality and consistent building standards, the government requires Help to Buy developers to follow the Consumer Code for homebuilders, the New Homes Ombudsman, the Building Safety Charter and to fulfil planning permissions and building regulations.
They must also display their Home Builders Federation star ratings, if they have any, when they advertise homes and they have to give homebuyers a new home warranty before they complete their purchase.
Will German, director of Help to Buy at Homes England, says: “Help to Buy has already helped more than 270,000 people into home ownership and 82 per cent are first-time buyers.
“The new Help to Buy equity loan helps those who need it most, first-time buyers.”
The scheme is indeed a blessing as many would-be first-time homeowners are now effectively locked out of the mortgage market thanks to a paucity of lenders with high loanto-value products.
Mortgages that require a five per cent deposit are non-existent at the moment and 90 per cent mortgages that need a 10 per cent deposit are hard to find.
Property Post mortgage columnist Andrew Milnes, business principal of the Mortgage Advice Bureau, Bingley, says: “Help to Buy is a beacon of hope at the moment as with the government’s 20 per cent equity loan and a five per cent buyer deposit, it means that you only need a 75 per cent mortgage and these are readily available.
“Critics say the Help to Buy scheme for new-build homes has lined developers pockets and it has given them a tremendous boost but, while it’s not for everyone, it has helped a lot of young people who have been desperate to get onto the property ladder.”
For those who want to buy a second-hand home with a 10 per cent deposit, Andrew says Accord Building Society and Platform, part of the Co-operative group, may help.
He adds: “It is slightly easier to get a 90 per cent mortgage now than it was in summer because a couple of lenders have come back into that market but it is still not easy.
“HSBC was one of the biggest first-time buyer mortgage lenders before lockdown but they and others have not come back into the 90 per cent loan-to-value market yet. Lloyds Banking Group, which includes the Halifax, were pioneers of the 95 per cent mortgage but they have no appetite for it now.
“The main reason is capacity because the mortgage market in general is very busy. There is also some caution about prices and whether they will fall off a cliff come March next year.”
Those who can manage a 15 per cent deposit and have a good credit rating should be fine as 85 per cent mortgages are easy to find. Andrew’s advice to those who need a 90 per cent loan is “Be patient and get your ducks in a row as lenders can afford to be choosy.”
By this he means make sure your credit history is good as lenders will look for debts and missed payments. They also like to see proof that you can repay responsibly, so it can help to spend on a credit card but pay it back in full each month. You should also ensure that you are on the electoral roll.
You can also use the time to keep saving and to check out the government Lifetime ISA. It can add a 25 per cent bonus to your savings for a first home, up to a maximum of £1,000 per year.
Help to buy is a beacon of hope at the moment ...as it means you are eligible for a 75 per cent mortgage and they are plentiful.