First-time clients who use Help to Buy to get to the property ladder face paying a premium in excess of lb30,000.
That’s based on new information through the price comparison website Reallymoving, which claims first-time buyers using Assistance to Buy paid a typical lb303,000 in February, much more than the average of lb270,000 spent by people who bought a home on the open market.
So, does using Assistance to Buy still seem sensible for first-time buyers? Here, we explain the pros and cons of the new-build scheme, and offer suggestions about alternatives for buyers with a small deposit.
The Help to Buy premium
Reallymoving claims that first-time buyers accounted for 57% of home-buyer activity in January and February, with one in five selecting a new build on the second-hand home.
And those using Help to Buy faced paying reasonably limited of a whopping lb33,000, according to research according to 44,000 quotes offered by the website.
Rob Houghton of Reallymoving says: ‘Help to Buy is definitely helping first-time buyers get onto the housing ladder, however these figures suggest that they may be paying a lot more than the property is worth to get the assistance they need to raise a first deposit.’
Reallymoving claims the so-called ‘Assistance to Buy premium’ increased to 12% in this February, as shown within the graph below.
How the Help to Buy scheme works
The Assistance to Buy equity loan scheme, which was introduced in 2013 in England, allows buyers to use a 5% deposit and take advantage of an equity loan as high as 20% (40% working in london) of the property’s value in the government. This means they are able to then obtain a mortgage for the remaining 75%.
The scheme is limited to new-build properties.
You can learn about the basics of Help to Buy by looking into the short video below.
Help to purchase: the professionals and cons
There’s no doubt that Help to Buy continues to be popular, with 195,219 properties bought with a Help to Buy equity loan in England between its launch in April 2013 and also the end of September last year.
The advantages of Help to Buy
The disadvantages of Assistance to Buy
Changes to assist to Buy from 2022
The government hasn't turned a blind eye to criticisms of their flagship scheme, and it’s set to undergo an overhaul from April 2022.
From then, the scheme are only available to first-time buyers, and also the maximum amount they'll be in a position to borrow will be capped based on the region they're buying in.
You can learn more about the cost caps in our full guide on Help to Buy equity loans.
Buying a new-build home
The government has pledged to create 300,000 new homes by 2025 as it looks to tackle the housing shortage.
While new builds have faced criticism for his or her quality and price of craftsmanship, there are some positives.
For instance, when purchasing a new-build home, many of the fittings are often contained in the price, your energy bills could be cheaper and – theoretically, at least – you won’t face the constant maintenance issues that you will probably find in an existing property.
Help to purchase alternatives
Help to purchase Scotland and Help to Buy Wales
Scotland and Wales run their very own Assistance to Buy schemes.
Help to purchase Scotland allows you to remove a 15% equity loan on a new-build property priced as much as lb200,000. Unlike England, the equity loan will stay interest-free.
Help to purchase Wales, meanwhile, provides an equity loan as high as 20% of the value of a new-build home priced up to lb300,000. Interest on the loan is phased exactly the same way as with England.