Towards the end of 2018, Philip Hammond delivered the annual budget to MPs in the house of commons. Included were details of the money being put towards housing and changes to the Help to Buy scheme.
It was revealed that a further £500 million would go to the Housing Infrastructure Fund – meaning there will be £5.5 billion in the pot, in total. This will allow for a further 650,000 homes to be built in partnership with housing associations across the country.
Mr Hammond then announced details of an extension to the Help to Buy scheme, which had been scheduled to end in April 2021. The scheme, which allows homebuyers to purchase newly-built homes with only a 5% deposit, will now continue to run until March 2023. However, he also added that the government has no intention to introduce another Help to Buy product once the scheme has ended, suggesting that there is limited time left for homebuyers to benefit from government assistance.
How Does Help to Buy Work?
Under the current scheme, buyers receive between 20% and 40% of the cost of a new house from the government, in the form of an equity loan. This loan is interest-free for the first five years and can be paid off at any time. The cap for the value of the property is set at £600,000 nationwide. By April 2021, the government will have loaned 360,000 homeowners an impressive £22 billion.
Help to Buy currently supports around 33% of housebuilders’ private sales and around 20% of buyers taking advantage of the scheme are already homeowners.
How is Help to Buy Changing?
From April 2021, the scheme will become more restrictive. Firstly, only first-time buyers will be eligible for a Help to Buy loan. Secondly, the £600,000 cap on the value of purchased property will be replaced with a location-dependent price cap.
The new price cap will be set at a price calculated as 1.5 times the average regional first-time buyer property price. In London, the cap will remain at £600,000. At the other end of the scale, in the North East (where property is much cheaper) the cap will sit at £186,100. Here in the North West, buyers will be capped at a property price of £224,400.
New Property Price Caps*
- North East – £186,100
- North West – £224,400
- Yorkshire – £228,100
- East Midlands – £261,900
- West Midlands – £255,600
- East of England – £407,400
- London – £600,000
- South East – £437,600
- South West – £349,000
*According to HM Treasury analysis
Other News from the Budget
It was also revealed that stamp duty for first-time buyers of shared ownership property up to £500,000 in value would be abolished. This will be applied retrospectively to the date of the last budget (November 22nd 2017.)
