Two years prior to the launch from the next iteration of Assistance to Buy, the federal government faces criticism over its plans to introduce regional price caps. So will those most looking for support really take advantage of Help to Buy 2.0?
From 2022, the Help to Buy equity loan scheme will undergo wholesale changes, with eligibility being restricted to first-time buyers and price caps being set from region-to-region.
Here, we explain why don't you everyone welcomes the plans, and offer advice on whether Assistance to Buy may be the right scheme for you personally.
The future of Assistance to Buy
Currently, both first-time buyers and home movers in England can use the assistance to purchase equity loan scheme.
The scheme involves the government providing financing of up to 20% of the new-build property’s value (or 40% working in london), allowing buyers to purchase a house having a 5% deposit and 75% mortgage (or 55% in London).
Official statistics reveal that more than 210,000 homes happen to be bought using Assistance to Buy equity loans since 2013. But in the last few years, the scheme continues to be blamed for inflating the price of new homes, with big property developers pocketing huge profits in the government scheme.
With this in your mind, the federal government has intervened to reform Help to Purchase from April 2022.
Help to purchase from 2022: the introduction of price caps
Since Help to Buy’s launch in 2013, eight in 10 properties happen to be sold to first-time buyers, and from April 2022 the scheme are only open to people buying their first home.
Perhaps most of all, the government will also place a cap around the maximum amount developers may charge for Assistance to Buy properties. This will be fixed at 1.5 times the average first-time buyer price in every region (as of Autumn 2022).
As it stands, all properties sold in England using equity loans from April 2022 will need to follow the following price structure:
| Region | Maximum price |
| North East | lb186,100 |
| North West | lb224,400 |
| Yorkshire & The Humber | lb228,100 |
| East Midlands | lb261,900 |
| West Midlands | lb255,600 |
| East of England | lb407,400 |
| London | lb600,000 |
| South East | lb437,600 |
| South West | lb349,000 |
Concerns over Assistance to Buy price caps
With just below two years before the price caps enter into force, the government is already facing criticism for setting the amount in Autumn 2022 rather than waiting until much nearer the launch date.
The estate agency group Hamptons International claims that first-time buyers within the North of England could struggle to buy a home using Assistance to Buy if the current caps remain.
As it stands, homes within the North East of England will have price caps of lb186,100. Hamptons says this is lacking, pointing to the fact that the average new-build home sold in the region last year was lb208,220. The agency claims that 53% of new homes in the region could be too expensive for Assistance to Buy when the caps were introduced now – let alone in 2 years.
And it’s not just its northern border that may be affected.
Hamptons says 44% of new homes are sold within the East Midlands for more than its cap of lb261,900, while 43% of new-builds in the West Midlands would breach the limit of lb255,600.
Why may be the price cap significant?
Ultimately, this matters because it means developers will either need to be put off by Assistance to Buy – the scheme is lucrative but perhaps insufficient so to sell properties below market price – or build various kinds of property to adhere to the rules.
Aneisha Beveridge of Hamptons says: ‘Price caps basically put some areas out of reach for Assistance to Buy developers, or may mean they need to adapt what they build – for instance, more flats in expensive areas instead of houses – so they sit below the cap.’
The other concern is the current caps don’t take into account any house price growth between now and 2022. The estate agency Savills forecasts that property prices could increase by 4% next year, and then 3% in 2022.
Alternatives to assist to Buy
There’s no doubt that Help to Buy continues to be popular with first-time buyers during the last six years, but it’s in no way the only option available.
When weighing up whether Assistance to Buy fits your needs, consider these alternatives
95% mortgages
Rates on 95% mortgages are attractive at the moment, and getting a traditional mortgage means you won’t be limited to a new-build home. On the other hand, a fall in property prices could make you at risk of negative equity.
Shared ownership
Shared ownership schemes allow you to purchase a share of the property (sometimes as little as 25%) from a housing association, and pay rent around the rest.
These schemes can be a route to the ladder in expensive city markets, but beware of the combined cost of your mortgage, rent and any fee.
Guarantor mortgages
Guarantor mortgages are available in all shapes and sizes, including items that require parents to make use of either their savings or property as security on their child’s mortgage.
Learn about the various kinds of guarantor product within our full guide on how parents can help first-time buyers.
Other Help to Buy schemes in the UK
Help to purchase in Scotland
Help to Buy Scotland also allows first-time buyers and home movers to purchase a new-build property with a 5% deposit.
The scheme includes properties priced up to lb200,000 and will run until at least March 2022.
The biggest contrast with the English scheme is that equity loans in Scotland are supplied interest-free for their full term, rather than just the first 5 years.
Help to Buy in Wales
Help to purchase Wales offers a 20% equity loan to first-time buyers and home movers.
As with England and Scotland, it’s on new-build properties, but with a cost limit of lb300,000.
The equity loan is provided interest free for the first 5 years.
Forces Help to Buy
Forces Help to Buy allows Military personnel to gain access to as much as 50% of their salaries with an interest-free basis to finance a house deposit.
The maximum loan available is lb25,000, which must be repaid over 10 years.
The scheme is placed to run until the end of the year, when it will be reviewed. Discover more about the rules in our full Help to Buy guide.
