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How the Help to Buy scheme has evolved

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Meta: What you need to know about how the Help to Buy scheme has evolved since its launch

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The Help to Buy loan scheme, originally launched in 2013, has been updated and will now be in place until the end of 2023. Here is what you need to know about if you are a first-time buyer.

The scheme is now open to first-time buyers in England only and it is designed to help them get their foot onto the property ladder and buy a house, via an equity loan scheme. (Previously the scheme was open to other kinds of buyers, but the latest Help to Buy loan scheme is for first-time buyers only.)

What is the Help to Buy scheme?

The scheme exists to help first-time buyers to buy a new-build home with just 5% deposit. As part of the scheme, first-time buyers can access an equity-based loan, usually secured against the property itself, to cover an additional 20% of the purchase value – and up to 40% for properties in London.

This means that buyers then take out a mortgage for 75% of the property only or 55% in London. This allows buyers to access more affordable deals on the mortgage market, thanks to having a more generous deposit and LTV value.

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How has the scheme worked so far?

During the first seven years that the scheme was in operation, nearly 300,000 new homes were bought under the Help to Buy scheme in England, and 82% of these purchases were taken up by first-time buyers, even though the scheme originally included home movers too.

What are the key differences between the new and old scheme?

– The new scheme is only for first time buyers

– The new scheme also features regional price caps to reflect price variations in London and the South. The previous loan scheme used a blanket price cap of £600,000. The price caps are calculated as being 1.5 times the average property price paid by first-time buyers in England’s regions, calculated in summer 2018.

Why is the Help to Buy loan scheme changing?

The scheme has long been accused of inflating property prices, with over 5,000 properties having since been resold at a loss, even though house prices in the country rose overall. The scheme was also misused in some cases, by allowing people who could afford a house on the open market to access public funding, rather than prioritising support to those who most needed it. For example, figures from the government showed that almost 30% of use had household incomes of £60,000 or more – and 10% earned more than £80,000.

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