Government Announces New Help To Buy Scheme | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 17/11/2020

The Government is set to replace the existing Help to Buy Equity Loan scheme with a new scheme that is restricted to first-time buyers only and introduces regional price limits.

The new Help to Buy Equity Loan (2021-2023) is due to replace the existing scheme on 1 April 2021, which means that existing homeowners wanting to use the existing Help to Buy Equity Loan scheme to help towards buying a new home have less than five months to apply for the scheme.

The current scheme allows both first-time buyers and homeowners to use the Government-backed Help to Buy Equity Loan to buy a new-build home. The launch of the new scheme will result in just first-time buyers being able to apply for the loan, which must be used towards buying a new-build home.

Under the new scheme, first-time buyers will still be able to borrow up to 20% (40% in London) of the cost of a newly built home. The buyer must pay a minimum of 5% deposit for the home and then use a help to buy mortgage to fund the remaining cost of the property. The loan is interest-free for the first five years and then interest fees start at 1.75% and rise each year in April by the Consumer Prices Index plus 2%. Borrowers are also charged a monthly management fee of £1 for the term of the loan.

Along with restricting the new loan to first-time buyers only, the Government has also introduced regional price caps, which means that homes eligible for the loan have to below the set maximum price. The price caps are:

 

Region Price cap for Help to Buy
homes April 2021 to March 2023
North east £186,100
North west £224,400
Yorkshire and The Humber £228,100
East Midlands £261,900
West Midlands £255,600
East of England £407,400
London £600,000
South east £437,600
South west £349,000

 

First-time buyers wanting to use the Help to Buy: Equity Loan (2021-2023) can reserve their new home using the scheme from 16 December 2020, but they cannot get the keys to move in until the 1 April 2021.

Commenting on the launch of the new scheme, Will German, director of Help to Buy at Homes England, said: “Help to Buy has already helped more than 270,000 people into home ownership and 82% are first-time buyers. The new Help to Buy builds on this success, with first-time buyers in 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.”

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