First-time buyers in the UK who are struggling to get on the property ladder could soon be offered more help from a government scheme that is rumoured to be returning. According to a report from The Times, Prime Minister Rishi Sunak is said to be drawing up plans to boost support for first-time home buyers by bringing back the Help to Buy: Equity Loan scheme.
With the difficulties facing new buyers today, from increased house prices to soaring interest rates, the Help to Buy equity loan helps first-time buyers purchase a new-build property with just a five percent deposit. Those eligible can borrow a loan amounting to 20 percent of the purchase price, or 40 percent in London, interest-free for five years.
The government scheme was first launched back in 2013 by then chancellor George Osborne. In October 2018, the government announced that the scheme would close to new entrants in October 2022, with those who have applied able to make use of the loan up until March 31, 2023.
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Over the past decade the government has issued more than 375,654 Help to Buy loans with a total value of £23.6 billion.
According to The Times, the move to bring the Help to Buy equity loan back was discussed before the spring budget, but was not taken forward amid fears that it would prove inflationary.
Three government sources have reportedly said a new-buyers’ support scheme was “back on the table” and could form part of Jeremy Hunt’s autumn statement.
“We cannot go into the next election without an offer for first-time buyers,” one minister told The Times. “We all know that homeowners are more likely to vote Conservative and we cannot cede this ground to Labour.”
The news comes after labour pledged more support for first-time buyers yesterday (April 30) and announced plans to revive targets to ensure that the private sector would build at least 300,000 homes a year.
Not to be confused with the Help to Buy ISA, the Help to Buy equity loan (when active) is eligible to any first-time buyer who is 18 or over. You need to be able to afford the fees and interest payment that come with using the equity loan.
The Gov.uk website explains: "During the term of the equity loan you only pay interest on the amount you borrowed. You do not pay off any of the loan itself. But you can choose to pay all or part of it off at any time.
"If you sell your home, you will need to pay off all of your equity loan."
First-time buyers can only use the equity loan on a new build home from any of the homebuilders registered with the Help to Buy scheme.
A new-build includes converted commercial premises and conversions of buildings which have never been used as homes. It must also be the only home you own and live in, and it must not have been lived in by anyone before you buy it.
The amount you pay for a home depends on where in England you buy it as there is a 'maximum property purchase price' limit for each region.
First-time buyers in the north west can use the scheme to buy a home up to and including the value of £224,400.
Gov.uk explains: "To use the loan you’ll need to pay a minimum deposit of 5 percent of the property purchase price and arrange a repayment mortgage of at least 25% of the property purchase price.
"You can then borrow an equity loan to cover from 5 percent and up to 20 percent of the property purchase price of your newly built home. If the property is in London, you can borrow up to percent.
"The equity loan percentage you borrow is used to calculate your interest and equity loan repayments.
For example, borrowing an equity loan of 20 percent on a property worth £200,000 means you will borrow £40,000.
You do not have to pay interest for the first five years of the loan but in the sixth year you’ll be charged interest at a rate of 1.75%.
This will be applied to the equity loan amount you originally borrowed and this annual interest is spread over the year in monthly payments.
You can find information on other government home ownership schemes available on www.OwnYourHome.gov.uk.
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