Since its launch in 2013, more than 270,000 new-build homes have been bought using the Help to Buy Equity Loan scheme across England. This includes 24,461 sales in London, 83% of which took place after February 2016 according to the Ministry of Housing, Communities & Local Government, when the maximum government contribution towards a home in the capital was increased to 40%. Outside of London it has remained at 20%.
In the midst of Covid-19 and Brexit this key component of the property market over the last 7 years is set to face its most significant chance since inception, as from April 2021 it will be restricted to first time buyers. Figures from the Home Builders Federation suggest that around 18,400 sales using Help to Buy were at risk of delays in construction. This includes 7,700 transactions totalling £2.4 billion that will not be eligible in the new phase of the scheme.
The government has responded to concerns from developers, by extending the physical completion date of properties from the 31st of December 2020 to the 28th of February 2021. Non first-time buyers must still legally complete their purchase by the 31st of March 2021 however, the same deadline for the current stamp duty holiday, otherwise they risk losing the property
With the mortgage market currently experiencing unprecedented levels of demand, this is taking its toll on the service levels of not just lenders but also other parties such as conveyancers. Therefore, it is important for both developers and purchasers to keep this deadline in mind, whether utilising the Help to Buy scheme, the stamp duty holiday or both. You will need to apply for a mortgage, exchange and complete by this date so working with your mortgage broker to prepare your application and avoid unnecessary delays will be key. We may even see further calls for an extension, or at least a flexible approach to the deadlines for pipeline cases, if the second wave of the virus and subsequent lockdowns cause delays in the construction sector.
The pandemic has seen most lenders withdraw from the 90 to 95% LTV market and with Help to Buy coming to a complete end in 2023, even for first time buyers, support for those without large deposits will be crucial in driving the market. There are schemes in development that could fill the gap, but collaboration between developers, lenders, regulators and government will be essential in providing borrowers the opportunity to get onto the property ladder.
Your home may be repossessed if you do not keep up repayments on your mortgage. Some forms of Buy to Let and Commercial Lending advice are not regulated by the Financial Conduct Authority
Lee Langley is the Principal Mortgage and Protection Adviser at OnPoint Mortgages. OnPoint Mortgages a trading style of L&D Mortgages Limited is an appointed representative of The On-Line Partnership Limited which is authorised and regulated by the Financial Conduct Authority.