What’s the future for Help to Buy?

Since 2013, the Help-to-Buy equity loan scheme has been popular with people looking to buy new-build homes. This is because it has created a path to property ownership that requires a much smaller deposit than usual, sometimes just 5%, and up to 20% of the property’s sale price being taken care of by a government loan.

The Help-to-Buy ISA has also seen many first-time buyers looking to save toward a deposit, with the government boosting savings by 25% up to a maximum of £3,000.

The issue, however, is that there are going to be some changes taking place to both schemes and, they’ll both be coming to an end soon. The Help-to-Buy ISA closed its doors to new applicants in November 2019 and those who had already opened one will need to claim their 25% bonus buy December 2030.

The Help-to-Buy scheme is also becoming less attractive. Presently, the equity loan scheme is available to both existing homeowners and first-time buyers. However, it will only be available to first-time buyers from 2021 and will close completely in March 2023. Furthermore, the 2021 changes will also include new regional value caps, leading to possible exclusions from the scheme to many people in certain regions.

What are the alternatives to the Help-to-Buy scheme?

Although the Help-to-Buy scheme is currently still available, there are some major issues with it. In a recent article by Volition Removals, problems with owners being exposed to negative equity are explored. Of course, changes in economic conditions and subsequent downturns in housing prices can have a major impact on Help-to-Buy participants falling into negative equity and struggling to find re-mortgaging options. 

Volition Removals also touch upon the alarming fact that there isn’t another scheme set in place to take over from Help-to-Buy currently, and this is leaving potential buyers wondering what the best course of action is.

In terms of the Help-to-Buy ISA, the current alternative is the Lifetime ISA. This ISA also offers a 25% bonus on savings and has the benefit of having a much higher bonus cap which can be earned over a massive 32 years. The issues with the Lifetime ISA, however, include the fact that any bonus earned would be completely wiped from the account if money is withdrawn for any reason other than to buy a property. This isn’t the case with the current Help-to-Buy ISA. There would also be a 6.25% penalty on the capital sum of the account. Furthermore, there is a £450,000 price cap on properties so people living in more expensive regions may struggle to find this ISA useful.

Ultimately, there is a lot of confusion and a severe lack of information about schemes that could replace the Help-to-Buy equity loan scheme in the future. However, with the potential issues that the current scheme faces, it might not be a bad thing that it’s coming to an end soon. For now, there is the ability to earn bonuses on your savings through the Lifetime ISA, but that doesn’t necessarily fit everyone’s needs either.

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