Which? Money Podcast
Join us on our weekly audio show for the latest money news and personal finance hacks to help make you better off.
Listen nowIs Help to Buy coming back?
The scheme closed in England last year, so we take a look at whether it might
make a return and what else is available to help first-time buyers
The government is remaining tight-lipped over rumours the Help to Buy scheme could be resurrected just months after it was drawn to a close.
Reports have been circling that the equity loan could be brought back to boost first-time buyer support.
Here, Which? delves into the rumour and looks at what options are available that could help first-time buyers onto the housing ladder now.
Is Help to Buy returning?
Help to Buy closed to new applicants in England last year and the final deadline to complete a purchase was 31 March 2023.
The most recent scheme allowed first-time buyers to borrow an equity loan to cover up to 20% (or 40% in London) of their property purchase price.
A Downing Street spokesperson told us this week that 'supporting aspiring homeowners is a government priority', but stopped short of confirming whether Help to Buy will be returning.
They continued: 'We are committed to delivering 300,000 new homes per year and are investing £11.5bn to build the affordable, quality homes this country needs.'
There could be a precedent for it coming back, though. In Wales, Help to Buy has been extended until 2025.
- Find out more: how Help to Buy equity loans work.
Should Help to Buy come back?
The most recent government statistics show there were 383,903 properties bought using a Help to Buy equity loan between 1 April 2013 and 31 December 2022.
However, during its decade-long run, the scheme split opinion, with critics blaming it for inflating house prices.
A Which? investigation also found one in seven Help to Buy homes lose value making it harder to move up the property ladder.
- Find out more: what's happening to house prices.
What other first-time buyer support schemes are there?
It's not clear if the Help to Buy scheme will come back in England, but there are other schemes available now which could help first-time buyers:
- First Homes scheme allows first-time buyers in England to get a 30% discount when buying a new-build home. Councils can set their own eligibility rules (eg limiting properties to local buyers or prioritising key workers). The government has specified that a quarter of all affordable housing sold by developers must fall under the First Homes initiative.
- Lifetime Isa is a tax-free savings or investment account designed to help those aged 18-39 save for their first home or retirement. It offers a 25% bonus, with the government paying up to £1,000 a year if you save the maximum £4,000. The maximum house purchase price is limited to £450,000.
- Help to Buy Isa Although they shut to new applications in 2019, existing Help to Buy Isas can remain open until 1 December 2030. The government tops up the account with a 25% bonus, up to a maximum of £3,000, paid on savings of £12,000. You're restricted to buying a property worth up to £250,000, or £450,000 in London.
- Guarantor mortgages Parents and grandparents can help their child buy a home by using their property or savings as collateral.
- Right to Buy gives council tenants the opportunity to buy their home at a discount of up to 70% off the purchase price, up to a total of £116,200 in London and £87,200 elsewhere in England. If you have spent at least three years living in a council house or flat in England, you're eligible.
- Shared ownership is a 'part buy, part rent' initiative. You buy a share of a property (usually from 25%) from a housing association and pay rent on the remainder. This allows you to get a foot in the door, but you'll need to do your sums, as the combined cost of your mortgage, rent and service charge can quickly add up.
Low-deposit mortgages
A major factor working against first-time buyers is the size of a deposit needed to purchase a house. According to Halifax, the average deposit put down is now more than £62,000.
This has priced out hundreds and thousands of potential buyers who are struggling to build savings in a cost of living crisis.
As a result, the government has extended its 95% mortgage guarantee scheme, which enables people to buy a property valued up to £600,000 with a 5% deposit.
The best rates on 95% mortgages
Interest rates come at a premium, so expect to be paying back a substantial amount each month. But taking on a 95% mortgage could be your way of getting onto the property ladder. The tables below show the cheapest rates currently on the market:
Two-year fix
| Lender | Initial interest rate | Revert rate | Upfront fee |
|---|---|---|---|
| Leeds Building Society | 5.29% | 6.99% | £999 |
| Coventry Building Society | 5.3% | 6.99% | £999 |
| Nationwide Building Society | 5.34% | 7.74% | £999 |
Source: Moneyfacts. Rates correct as of 25 May 2023.
Five-year fix
| Lender | Initial interest rate | Revert rate | Upfront fee |
|---|---|---|---|
| Digital Mortgages by Atom Bank | 4.89% | 6.99% | None |
| Nationwide Building Society | 4.89% | 7.74% | £999 |
| Platform | 4.89% | 7.12% | £1,499 |
Source: Moneyfacts. Rates correct as of 25 May 2023.
If you can afford to do so, a bigger deposit will save you money in the long run.
Stretching to a 10% deposit can make a big difference in your monthly repayments as the leading rate for a two-year fix is 4.82%, and 4.42% for a five-year fix.
To see the best rates for 90% mortgages, see our best mortgage rates story which is updated weekly with the cheapest deals.
Return of the 100% mortgage
Mortgages with no deposits had faded into distant memory over the last decade, however, Skipton Building Society has brought the 100% mortgage back to life.
Aimed solely at helping renters, the Track Record Mortgage offers a five-year fixed-rate of 5.49%, with no additional product fees.
To be eligible, borrowers need to have a good recent track record of paying rent – giving proof of 12 consecutive months of rental payments over an 18-month period. The monthly mortgage payment also cannot exceed their average monthly rent from the past six months.
- Find out more: 100% mortgage makes a comeback: what are the risks?
