Help to Buy scheme may be extended to 2021
The scheme could be extended to help buyers whose purchases have been hit by construction delays caused by the lockdown
Wed, 07/29/2020 – 12:12
The UK Government may extend the Help to Buy scheme because of the coronavirus pandemic.
The Help to Buy scheme could be extended beyond its planned end date of April 2021 due to construction delays caused by the lockdown, the Financial Times reports.
An official announcement on the extension could be made as soon as Friday.
The current Help to Buy scheme is due to end next April, when it will be replaced by a new version which will run until March 2023.
If the original scheme ends in April 2021, this means that sales transactions need to be completed by December 2020.
However, housebuilders have warned that thousands of home sales are at risk of collapse because construction delays caused by the lockdown mean they will not be able to meet the December deadline.
An extension would allow builders to complete deals that have been delayed by the coronavirus pandemic before the policy ends.
Craig Hall, head of broker relationships and propositions at Legal & General Mortgage Club, says: “Today’s news that the Government is drawing up plans for an extension to Help to Buy will give developers much more certainty around which planned sites will still be eligible for the current scheme. This will be particularly important as many housebuilders will be revising their timetables for completion in light of the impact of the Covid-19 lockdown.
“An extension will also help to support the growing demand for Help to Buy amongst homebuyers, including buyers with smaller deposits who now face a much more limited choice of high loan-to-value mortgages.”
How does Help to Buy work?
Help to Buy is a Government-backed initiative designed to help people buy a property worth up to £250,000 or £450,000 in London.
Introduced in 2013, it is available to first-time buyers and existing homeowners looking to move up a rung on the property ladder with a deposit as low as 5% through an equity loan.
With the scheme, you can borrow up to 20% of the purchase price of a new-build home, or 40% in London. You won’t be charged fees on the loan for the first five years of owning your home.
The scheme is dues to end in April 2021 when it will be replaced by a new version only open to first-time buyers.
The Help to Buy scheme has helped thousands of people get a foot on the property ladder who otherwise would have been unable to because of high deposits.
However, the scheme has been criticised for helping people who could afford a home, driving up property prices and increasing the profits of housebuilders.
Kate Davies, executive Director of the Intermediary Mortgage Lenders Association (IMLA), says: “COVID-19 has caused severe disruption to the market. Any consideration of new schemes has been side-lined while firms have worked to protect existing customers.
“Pre-planned construction projects have also been significantly delayed – leaving customers who were relying on the Help to Buy scheme to purchase their new-build properties to feel as if this could be taken away by a somewhat arbitrary deadline.”