First-time buyers face crunch time to use Help to Buy

First-time buyers have just six weeks left to use the Help to Buy equity loan before the government-backed scheme disappears.

At least 25,000 first-time purchasers will be locked out of the housing market after the scheme closes to new applicants on October 31, leaving a “void” of support for entry-level purchasers just as the brunt of the cost-of-living crisis hits, analysts warned.

Under the scheme, first-time buyers can purchase a new-build property with a 5pc deposit and a 20pc equity loan that is backed by the government and is interest-free for the first five years. In London, where house prices are higher, the equity loan is 40pc. 

Help to Buy officially ends on March 31 2023 – however, this is the deadline for all sales to complete. The deadline for first-time buyers to register is five months earlier, at 6pm on October 31. 

This means first-time buyers have six weeks to house hunt, reserve a home that is supported by the scheme and submit a Property Information Form.

After the deadline, first-time buyers will have few options to get on the housing ladder without financial support from their parents.

Nick Whitten, of JLL property consultants, said: “Our research suggests that after the cut-off, there will be a 50pc fall in first-time buyers purchasing new-build homes straight away. That means there will be at least 25,000 fewer sales per year.”

He added: “This is an absolutely crucial six weeks, if you are a first-time buyer without significant support from the Bank of Mum and Dad.”

The Help to Buy equity loan scheme supports around 50,000 sales a year – equivalent to 36pc of all new-build sales in the three years to March 2021, according to Savills estate agents.

The scheme has been criticised for inflating prices of new homes and for trapping homeowners in high interest rate deals after their five-year period ends. But regardless of Help to Buy’s flaws, the scheme’s withdrawal will be a hammer blow to first-time buyer transactions.

Lucien Cook, of Savills, said: “It is difficult to see what will fill the gap. If first-time buyers can’t rely on the Bank of Mum and Dad and they are struggling to get a deposit, it will be very hard for them – particularly because high rent prices will make it harder to save.”

First-time buyers will be stuck in the rental sector for longer. Others may stay living at home with their parents, Mr Cook said.

The government support will disappear just as mortgage rates are soaring, making the housing market even more inaccessible. High house price growth since the pandemic also means that getting a deposit to buy a property is now even harder, Mr Cook said.


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