Revitalising the Help to Buy Scheme: New Prospects for First-Time Homebuyers

The prospect of reintroducing the Help to Buy equity loan scheme is on the horizon, following its cessation for new entrants since 2022, particularly after the discontinuation of the First Time Buyer scheme. This development poses the question: what improvements could herald the return of this initiative?

Understanding the Help to Buy Scheme

Launched in 2013, the Help to Buy initiative was designed to assist first-time buyers in purchasing a home by supplementing their savings for a deposit. This government-backed loan aimed to simplify the process of getting on the property ladder.

Participants were required to save at least 5% of a new build home's purchase price. Subsequently, they had to secure a repayment mortgage covering a minimum of 25%. The government would then provide a loan of up to 20% of the home's price (or 40% in London), with the rest covered by a mortgage lender.

For instance, a £200,000 home outside London could see a buyer receiving a £40,000 loan through the scheme. Its initial five-year interest-free loan period was a significant draw.

Nevertheless, the scheme was not without its limitations.

Reasons Behind the Scheme's Discontinuation

The Help to Buy scheme was closed to new applicants outside Wales by October 2022, with complete cessation by March 2023, due to several controversies.

One significant issue was the property price cap, which varied by region, making it difficult for those wishing to purchase homes in more expensive areas of the UK. This discrepancy between the cap and actual property prices in these areas posed significant barriers, particularly given the average new build home price of £425,047 last year.

These issues, coupled with competition from other home-saving schemes like the Lifetime ISA, diminished its appeal.

Potential Improvements with the Scheme's Revival

Should the government decide to bring back Help to Buy, it may undergo modifications, though specifics remain uncertain.

Potential enhancements could include:

Eliminating the New Build Requirement:

Opening up the scheme to existing properties could increase accessibility for first-time buyers, particularly given the higher costs associated with new builds.

Increasing Price Caps:

Adjusting caps upwards would provide buyers with more options, helping them to purchase homes in their desired locations without being limited by stringent price ceilings.

Implementing a Fixed Repayment Amount:

Simplifying the equity loan repayment process to account for fixed amounts, regardless of property value changes, could offer more predictability and financial stability for homeowners.

While it's unclear what changes, if any, will be made to the Help to Buy scheme, these potential adjustments could significantly improve its attractiveness and utility for first-time buyers.