Is Help to Buy Coming Back in 2024?
Is Help to Buy coming back? The short answer is that it's unclear. While the scheme ended in 2023, there has been much speculation about its potential return in 2024 or beyond but no official announcements regarding reviving the popular government-backed scheme.
Note: The Help to Buy Wales scheme was extended to March 2025.
Help to Buy was a scheme that allowed first-time buyers and existing homeowners to purchase a new-build home with a smaller borrowing capacity. The government provided an interest-free loan for up to 20% (or 40% in London) of the property's value, which was repaid when the property was sold.
Between 2013 and 2023, an estimated 328,346 first-time buyers used Help to Buy to purchase their homes, with a total value of £24.7 billion in equity loans. The total value of properties sold under the scheme reached an eye-watering £109.2 billion.
What was Help to Buy?
Prospective homeowners are wondering when or if a new scheme will come in.
Under Help to Buy, a first-time buyer could have purchased a £250,000 home with a deposit of just 5% (£12,500). The government would then provide an interest-free loan of up to 20% (£50,000), reducing the overall mortgage needed to £187,500.
The scheme was particularly beneficial for those struggling to save for a large deposit, making homeownership more accessible. It also helped boost the construction industry by increasing demand for new-build homes.
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Why did Help to Buy end?
The government has not clearly explained the decision to end the scheme. However, the following factors are likely to have influenced the decision:
Competition with other schemes:
Help to Buy faced competition from other savings schemes, such as the Lifetime ISA, offering a government bonus of up to £1,000 per year. Other schemes include Shared Ownership, Professional Mortgages, and Dynamic Ownership.Rising house prices:
The scheme was criticised for contributing to rising house prices. As house prices increased, it became more difficult for first-time buyers to afford a home, even with the help of a government loan. Help to Buy was subject to regional property price caps, which limited its usefulness in more expensive areas.Concerns about market distortion:
Some argued that Help to Buy distorted the housing market by artificially increasing demand for new-build properties. This could have led to inflated prices and reduced incentives for developers to build more affordable homes.Government spending:
Help to Buy was a significant expense for the government, and there may have been a desire to allocate resources to other priorities.Changing economic conditions:
The end of the scheme coincided with a period of economic uncertainty, including Brexit and the COVID-19 pandemic.
While there are currently no plans to introduce a new scheme to replace Help to Buy, the government may reconsider its approach to supporting first-time buyers in the future.
What might be included in a new Help to Buy scheme?
Help to Buy alternatives
Shared Ownership
- This involves buying a share of a property and renting the remaining share from a housing association.
- For example, you might purchase a 75% share of a £200,000 property, paying a deposit of £15,000.
- You would then rent the remaining 25% from the housing association. Over time, you can staircase and purchase additional shares until you own the property outright.
Right to Buy
- This scheme offers a council tenant the opportunity to purchase their home at a discounted price.
- You must have been a secure council tenant for at least three years, the maximum discount is up to 70% of the property purchase price, with a maximum of £116,200 in London and £87,200 elsewhere in England.
First Home
- This scheme helps local people and key workers buy a home in areas of high demand, with developers offering homes to first-time buyers with a discount of 30% to 50% of the market value of the property.
Deposit Unlock
- Available from participating developers, a 5% deposit scheme on new-build properties where the home builder insures the mortgage to help the buyer get a better Loan-to-Value mortgage from lenders.
Professional Mortgages
- These mortgages allow professionals with qualifying jobs (such as doctors, nurses, vets, lawyers, and accountants) to borrow up to 5.5 or 6 times their salary to purchase a pre-owned property with a 5% deposit.
- To qualify for a professional mortgage, you'll need to have a good credit score, be a registered member of a relevant UK professional body and have qualified within the last ten years.
5.5x Income Mortgages
- This scheme allows individuals with high incomes (over £37,000 as a solo applicant or £55,000 as a couple) to borrow up to 5.5 times their household income.
- This scheme requires only a 5% deposit, making it easier to access homeownership with a smaller upfront investment.
Forces Help to Buy
- This scheme offers interest-free loans of up to a maximum of £25,000 to members of the Armed Forces (British Army, Royal Navy, Royal Air Force) to help them buy a home.
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Deposit Boost
- This scheme allows buyers to use a family member's equity to increase their deposit.
- If your parents want to help you buy a house but don't have a large cash reserve, they could consider remortgaging to release some equity.
- This equity could then be used to contribute to your deposit. A Deposit Boost requires two separate mortgages: a remortgage on a property to release equity and a separate mortgage on another home.
- Unlike guarantor mortgages, a Deposit Boost doesn't involve any financial connection between the buyer and the booster. This means that if you were to default on your mortgage payments, your parents wouldn't be legally responsible.
Deposit Loan
- Similar to the Deposit Boost, this scheme allows buyers to borrow money from a family member but this time it's in exchange for a share in the property.
- This can be done either with an equity loan where they become a part-owner of your property, or through an interest-free loan repaid when the property is sold.
- You could also go down the Gifted Deposit route where, usually parents, will gift either part or all of the deposit to their children to help them buy their first home. However, lenders require a 'deed of gift' letter which declares you are gifting and won't require the funds to be repaid.
Income Boost
- An Income Boost is a type of joint borrower sole proprietor mortgage.
- Buyers can increase their borrowing power by adding a friend or family member's income to their mortgage application.
- For example, if you earn £30,000 a year and the bank is willing to multiply your income by 4, you could borrow up to £120,000. A £20,000 deposit gives you a total budget of £140,000.
- However, if you add a parent's income of £40,000, you could potentially borrow up to £280,000 with a £20,000 deposit.
- To use an Income Boost, you'll need to find a family member or friend willing to act as your booster. They will be jointly responsible for the mortgage payments, but won't own a share of the property.
Dynamic Ownership
- Dynamic Ownership is a collaborative homeownership model that allows a group of up to five people to purchase a property together.
- This can be a great option for friends or siblings who want to buy a home but cannot on their own. By combining resources, you can increase your mortgage affordability and purchase a larger or better property than you might be able to afford individually.
- Additionally, living together can reduce your overall living expenses.
- One of the key benefits of Dynamic Ownership is that each owner's equity is separate and tracked. This means that you won't need to worry about who is paying their fair share.
- When the property is sold, the amount you make from the sale will reflect your individual contributions to the deposit, mortgage payments, and any property improvements.
- You'll need to create a home agreement outlining the terms of your arrangement. This agreement should specify each owner's share of the property, their responsibilities for mortgage payments, property maintenance, and other aspects of homeownership.
Savings as Security
- A Savings as Security mortgage, also known as a family springboard mortgage, allows a family member to use their savings as security for your mortgage, rather than using their income or home.
- Your family member must be willing to deposit a percentage of the property's value into a designated savings account with the lender.
- Typically, this is around 10% of the property's value. As long as you make your monthly mortgage payments on time, your family member's savings will be safe.
- After an agreed-upon time frame, your family member will get their savings back, along with any interest earned.
Savings schemes
- Consider saving into a Lifetime ISA to boost your deposit. You can contribute up to £4,000 per year and the government adds a 25% bonus, up to £1,000 a year.
- You can use these funds to buy your first home or help in retirement; if you withdraw the funds for reasons other than buying a home or reaching retirement age, you'll face a 25% withdrawal charge.
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