The Government’s application deadline for Help to Buy: Equity Loan Schemes has now closed (31st October 2022). This now means that by the 31st of March 2023, any first-time buyers must have legally completed their property. Homebuyers are expected to have the keys to their home by 6 pm. Homebuilders must tell homebuyers in advance if they cannot meet these dates. If these are not met, they will not be eligible to use the equity loan.
Originally launched in 2013 for first-time buyers of new-build homes to help them onto the property ladder. First-time buyers based in England who put down a deposit of at least 5% of the cost of the property, could use the scheme to borrow up to 20% of a property’s price. This was from the UK Government and interest-free for the first five years. Helping the buyer stretch their budget as well as access mortgages with cheaper interest rates.
Numbers released by the UK Government revealed over 55,000 households bought their home with the support of the Help to Buy: equity loan in the financial year 2020-21. Since its inception in 2013, more than 355,000 new-build properties have been bought with the help of an equity loan. The Home Builders Federation (HBF) states the scheme has generated about £60 billion in economic activity. The number of homes built in England went up from 110,530 in the year to June 2013 to 183,450. In total, the value of these equity loans has reached over £22 billion, with the value of the properties sold under the scheme going past the £90 billion mark.
However, the UK Government has stated that there are no plans to extend or replace the scheme when it ends.
The Impact Upon Home Builders
Under the terms of the Help to Buy: Equity Loan Funding Administration Agreement, homebuilders are required to reach Practical Completion by 31st of December 2022. This might mean considering the number of working days during December to ensure the deadline is met.
If this date cannot be met, the homebuilder must tell the buyer in advance and return their reservation fee in full. You must also tell your Help to Buy agent and contact the Help to Buy Claims team by email at [email protected].
Furthermore, if the homebuilder has exchanged, they must also unconditionally release the homebuyer from the contract and return their deposit. There is no deadline for exchange, but homebuyers must legally complete it on or before the 31st of March 2023.
Lastly, the removal of advertising is the responsibility of the home builder. Any marketing activities or advertising boards, for instance, need to be stopped and removed. Any costs that are incurred due to this are the responsibility of the home builder.
Is Now The Right Time?
Neil Jefferson, managing director of the HBF, believes that Help to Buy has been one of “the most successful government home ownership interventions in history and handsomely delivered on all its pre-set objectives. For the first time in decades, there is now no government scheme in place to support first-time buyers to purchase new homes at a time when political and economic instability has seen mortgage availability challenged”.
The National Federation of Builders (NFB) also does not believe this is a good time to end the scheme. Rico Wojtulewicz, head of housing and planning policy, says: “We have lobbied the government to keep Help to Buy and reform it in a way to ensure it supports certain criteria, such as higher energy-efficient housing, on smaller plot sizes of houses only, or to help specific people who struggle the most to borrow, such as families needing bigger homes or single people.”
Experts within the industry believe that no scheme will lead to a drop in the number of homes built. In addition to the impact on social housing in terms of wannabe buyers having to spend longer in rented housing to consider. A survey conducted by the Royal Institution of Chartered Surveyors has already started to see this trend of the letting market growing. Struggles with money will increase and many people will be left with the choice of staying at home, “bank of Mum and Dad”, shared housing, or renting if possible. Leading to another struggle for first-time guys getting on the housing ladder. Wojtulewicz explains: “With fewer people being able to access mortgages, the housing crisis will no doubt worsen as people continue to pay more in rent, live with parents longer or in overcrowded homes”. Housing Today believes “the government should not back away from its manifesto pledge of building 300,000 new homes a year by the middle of the decade. We badly need more homes, and a lack of supply is a major factor in creating problems of affordability for both buyers and renters”.
