Help-to-buy loan scheme is changing - how does it affect you?

Thursday, 11th February 2021, 2:24 pm
Updated Thursday, 11th February 2021, 2:24 pm
The Government’s help-to-buy equity loan scheme to support people onto the property ladder is changing again. (Picture: Getty)

The Government’s help-to-buy equity loan scheme to support people onto the property ladder is changing from April 2021 - but what does it mean for you?

Help to Buy is a Government programme which aims to help first-time buyers and those looking to move home to purchase residential property.

However, under the changes, the equity loans are now only available to first-time buyers - and the amount people can borrow is now being capped according to the location of the home they are purchasing.

Restricted to first-time buyers

When the scheme was announced in 2013, equity loans were open to anyone who wanted to own a new-build home, but had not saved a big enough deposit - with the loan helping to bridge the gap.

Applicants could borrow up to 20 per cent of the cost on homes up to £600,000 - meaning they would only need a five per cent cash deposit and 75 per cent mortgage to make up the rest of the purchase price.

However, the £600,000 limit is being slashed everywhere, except London, and the loans are now only available to first-time buyers.

While the terms remain the same - applicants can still borrow a minimum of five per cent and up to a maximum of 20 per cent, or 40 per cent in London of the full purchase price of a new-build home - the price of the property eligible is capped depending on where it is and the scheme is limited to first-time buyers only.

A Government spokesman said: “It is restricted to first-time buyers and includes regional property price caps to ensure the scheme reaches people who need it most.

“The amount you pay for a home depends on where in England you buy it.”

Equity loans of up to 40 per cent of a purchase price of up to £600,000 are available to first-time buyers purchasing a new home in London. (Picture: Getty)

Maximum prices

In Yorkshire, the maximum property price which qualifies for a loan is £228,100 - the average property price in the county, according to the latest UK house price index, is £180,856.

In the North-East, the maximum property price which qualifies for a loan is £186,100, against an average price of £140,248.

In the North-West, the price limit is £224,400, while the average price is £180,280.

In the East Midlands, where the average property price is £208,662, the maximum property price which qualifies for a help-to-buy equity loan is £261,900.

In the West Midlands, the maximum price is £255,600, against an average price of £213,974, while in the South West, where the average house price is £278,391, the maximum price is £349,000.

In the South-East, where the average property price is £342,271, the equity loan price limit will be set at £437,600, while in London, the loan limit will remain at £600,000, against an average property price of £513,997.

Applications are now open

Will German, director of Help to Buy at Homes England, said: “Help to Buy has already helped more than 270,000 people into homeownership and 82 per cent are first-time buyers. The new Help to Buy builds on this success, with first-time buyers at front of mind.

“We’re pleased we can help homebuyers with smaller deposits to own a home, at a time where there are fewer options open to them.

"Housing, like most sectors, has experienced a slowdown during the Covid-crisis, but Help to Buy continues to give homebuilders the confidence to keep on building at a more crucial time than ever.”

The new scheme will run from April 2021 to March 2023, and applications are now open.