Help to buy – the clock is ticking

The Help to Buy equity loan scheme was launched in April 2013, aiming to assist buyers for whom deposits were the main stumbling block in accessing their first home.

Initially the government planned it would run for three years, but the scheme was extended, now due to end a decade later in April 2023. The first phase of the scheme, which ran between 2013 and 2021 allowed any buyer to use the scheme, but only first-time buyers now qualify.

But for those looking to take advantage of the scheme the closing date for reservation under Help to Buy has been announced, with 31st October 2022 the cut off. This is to ensure deals are concluded prior to the April 2023 closure of the scheme.

So what is the Help to Buy equity loan scheme?

Details of eligibility for Help to Buy equity loan have changed since its inception.  But under the current scheme the government will lend up to 20% (40% in London) of the cost of a new home. Purchasers require a 5% deposit, with a mortgage for the remaining 75%.

There are no fees payable on the 20% loan for the first five years of owning your home. After year five interest is charged on the loan at 1.75%, with the fee increasing by CPI plus 2% in April each year.

The maximum price of home eligible for Help to Buy varies by region, with current maximum pricing set to run to the end of the scheme in 2023.

Maximum property price by region

RegionMaximum property price (April 2021 to March 2023)5% deposit equivalent (maximum)Maximum equity loan
North East£186,100£9,305£37,220
North West£224,400£11,220£44,880
Yorkshire and the Humber£228,100£11,405£45,620
East Midlands£261,900£13,095£52,380
West Midlands£255,600£12,780£51,120
East of England£407,400£20,370£81,480
South East£437,600£21,880£87,520
South West£349,000£17,450£69,800

Source: Homes England

Where has take-up been highest?

Since the scheme began in 2013, Help to Buy has helped over 355,000 buyers with a loan, issuing a total value of £22bn in loans across England. This equates to an average loan of £61,953 per property in England.

What replaces Help to Buy equity loan?

The end of Help to Buy equity loan will be a concern for both potential first -time buyers and housebuilders, for whom Help to Buy had provided a key source of demand for new properties.

Help to Buy equity loan is not the only scheme in place to help purchasers buy homes.  There hasn’t been any official announcement on a new version of Help to Buy from government so potential purchasers buying from November 2022 onwards will need to explore their options outside of Help to Buy. As well as government schemes there are also private sector initiatives to enable buyers to purchasers with lower deposits. Here are a few alternatives:

  1. Bank of mum and dad

    A recent report by Barclays suggests 56% of first-time buyers said they would have been unable to purchase their first homes without financial support from their families.

    But the bank of mum and dad is more complex than just gifted deposits. Family members, usually parents, can be added to mortgages as guarantors or joint borrowers to increase the amount a buyer can borrow. Alternatively, some lenders offer the option to create two mortgages, the first releasing equity from a family members home to gift as a deposit and the second to purchase the property for the new buyer.

  2. First Homes
    A government initiative which provides homes to first-time buyers at a discounted market rate.  A First Home must be discounted at a minimum of 30% against the open market value, sold only to a first-time buyer, with the discount being passed to all subsequent purchasers (who must also be first-time homeowners). After the discount has been applied to First Home sale price can be no higher than £250,000 outside London and £420,000 in Greater London.

    Potential First Home buyers are required to fund a minimum of 50% of the discounted purchase price through a mortgage or home purchase plan. Eligible purchasers must have household incomes not exceeding £80,000 outside of London or £90,000 in Greater London in the previous tax year.

  3. Mortgage Guarantee scheme

    Introduced in April 2021 and due to run until December 2022 the governments Mortgage Guarantee Scheme aims to increase the availability of higher (91% to 95%) loan-to-value mortgages. It provides lenders with the option to purchase a government guarantee which will compensate them (the lender) for a portion of their losses in the event of a foreclosure. A similar scheme was run by government from 2013. The scheme is available on mortgages for properties costing up to £600,000 although specific lenders may also have their own criteria. 

    The scheme appears to have encourage more activity.  Comparing the number of fixed-rate mortgages available to first time buyers in March 2021 (before the scheme was introduced) and June 2022 shows the number of products rose from just five in March last year to 207 in June this year according to Moneyfacts.

  4. Shared ownership

    Shared ownership is a well-established option for homebuyers, pre-dating Help to Buy. Buyers purchase a share of a property (between 10% and 75%) and pay rent to the landlord on the share they own. Buyers can staircase up, purchasing share in the property and paying less rent. Purchasers can choose a new home, or an existing property being re-sold through a shared ownership resale scheme. The rent payable is set at around 3% of the unsold equity per annum.

    View our Shared Ownership developments here

  5. Private sector alternatives

    There are an increasing number of schemes on the market which provide an alternative to Help to Buy. They follow a similar model, lending the purchaser money to increase their deposit. With the purchaser paying interest on the loan. These schemes have differing qualifying criteria but can often be used for both new and existing homes.

    JLL has an extensive collection of Help to Buy and Shared Ownership homes available across London, all with fantastic living spaces, amenities, and transport connections.

    Whether you’re dreaming of the greenery in Hampstead or the energy of Tottenham Hale, if you’d like to be within walking distance of Canary Wharf or out on the town in Brixton, we have the perfect home for you.

    Explore our extensive collection of Help to Buy properties and book a viewing today.

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