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First Time Buyer

First-time buyers warned ‘not to bother’ with Help to Buy applications after August

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First-time buyers are rushing to take advantage of the government’s Help to Buy Equity Loan scheme ahead of its closure on 31 October, with mortgage brokers warning applications should be submitted “urgently”.

Advisers said there has been a “noticeable increase” in people wanting to access the scheme after ministers announced applications would close in October, earlier than planned, while all transactions must be completed by 31 March 2023.

Paul Neal, mortgage specialist at Missing Element Mortgage Services, said anyone still wanting to access Help to Buy should submit applications as soon as possible.

He said: “We have seen an increase in the number of first-time buyers wanting to get on the Help to Buy ladder. Be very wary though, if you haven’t got all your ducks in a row you could be in for an expensive disappointment.

“The scheme operator is incredibly busy, as are solicitors. We have told our clients that if they haven’t got their application in by the end of the month then don’t bother.”

Since the Help to Buy launched on 1 April 2013 some 361,075 properties have been purchased with the aid of an equity loan, with the total value of government loans standing at £22.5bn on 31 March 2022.

The most recent figures from the Department for Levelling Up, Housing and Communities showed a fall in applications at the start of this year, with just 5,395 properties bought using an equity loan between January and March, down by 65% from the same period in 2021.

But amid rocketing inflation and rising interest rates, brokers said the recent sharp uptick in enquiries is being driven “by the fear of their mortgage eligibility being withdrawn in line with the help to buy scheme ending”.

Ben Tadd, director at Lucra Mortgages, said: “This is most commonly down to restrictive lending criteria factors such as a borrower being on a visa, a general lack of mortgage affordability, or a lack of their own self-funded deposit being available to them.

“For example, a borrower on a visa with a 5% deposit is currently able to purchase on the Help to Buy scheme with several high street lenders, due to the loan-to-value being at or below 75%.

“When Help to Buy finishes, they will then require a significantly larger self-funded deposit of 25% of the property value to be paid from their own resources.”

Mark Robinson, managing director at Albion Forest Mortgages, said the end of the scheme marked “a definite blow to first-time buyers”.

He said: “It has been arguably the most accessible way for first-time buyers getting on the property ladder and we are currently seeing an increase in people wanting to use the scheme.”

Help to Buy dates and deadlines

The government has been clear that it will not extend the deadlines any further, meaning anyone wanting to purchase with a Help to Buy equity loan must have reserved their home before 6pm on 31 October 2022.

To be eligible, the homebuilder must have finished building your home so it’s ready to live in, and it must have received a new-home warranty by 31 December 2022.

The legal completion deadline is the 31 March 2023, which is the last date you and your homebuilder can legally complete the purchase of your home.

You’re expected to have your keys by 6pm and if you don’t complete by this date, you won’t be given the equity loan.

What happens if you miss the Help to Buy deadline?

If your homebuilder cannot finish your home in time, it must return your reservation fee in full and if you have exchanged, they must unconditionally release you from the contract and return your deposit.

There are no other fees to apply but you may still have to pay legal costs even if the purchase falls through.

What other help is available for first-time buyers?

A new scheme developed by the Home Builders Federation called Deposit Unlock recently launched which allows first-time buyers and home movers to buy a new build home with a 5% deposit.

Under this scheme house builders pay to insure the mortgages instead of government topping up a buyer’s ability to afford repayments with an equity loan.

According to the Homeowners Alliance, builders then use some of the money from selling the homes for this purpose with the aim of making lenders more comfortable about offering high LTV mortgages on new builds.

Currently Nationwide and Newcastle Building Society are the only lenders offering Deposit Unlock while a limited number of housebuilders are participating.

Advisers warned it isn’t a like for like replacement, however. Robinson said: “Buyers will still need affordability for a 95% mortgage, leaving a gap for the people currently using the Help to Buy scheme.”

Deposit Unlock: participating builders

Bloor Homes
Countryside Properties
Crest Nicholson
Davidson Group
Taylor Wimpey