Two years before the launch of the next iteration of Help to Buy, the government faces criticism over its plans to introduce regional price caps. So will those most in need of support really benefit from Help to Buy 2.0?
Here, we explain why not everyone welcomes the plans, and offer advice on whether Help to Buy is the right scheme for you.
Official statistics show that more than 210,000 homes have been bought using Help to Buy equity loans since 2013. But in the last couple of years, the scheme has been blamed for inflating the price of new homes, with big property developers from the government scheme.
With this in mind, the government has intervened to reform Help to Buy from April 2021.
Perhaps most significantly, the government will also place a cap on the maximum amount developers can charge for Help to Buy properties. This will be fixed at 1.5 times the average first-time buyer price in each region (as of Autumn 2018).
As it stands, all properties sold in England using equity loans from April 2021 will have to adhere to the following price structure:
|Yorkshire & The Humber||£228,100|
|East of England||£407,400|
With just under two years until the price caps come into force, the government is already facing criticism for setting the levels in Autumn 2018 rather than waiting until much nearer the launch date.
The estate agency group Hamptons International claims that first-time buyers in the North of England could struggle to buy a home using Help to Buy if the current caps remain.
As it stands, homes in the North East of England will have price caps of £186,100. Hamptons says this is too low, pointing to the fact that the average new-build home sold in the region last year was £208,220. The agency claims that 53% of new homes in the region would be too expensive for Help to Buy if the caps were brought in now - let alone in two years.
And it's not just the North that could be affected.
Hamptons says 44% of new homes are sold in the East Midlands for more than its cap of £261,900, while 43% of new-builds in the West Midlands would breach the limit of £255,600.
Ultimately, this matters because it means developers will either have to shy away from Help to Buy - the scheme is lucrative but perhaps not enough so to sell properties below market value - or build different types of property to adhere to the rules.
Aneisha Beveridge of Hamptons says: 'Price caps basically put some areas out of reach for Help to Buy developers, or may mean they need to adapt what they build - for example, more flats in expensive areas rather than houses - so that they sit below the cap.'
The other issue is that the current caps don't take into account any house price growth between now and 2021. The estate agency Savills forecasts that property prices could increase by 4% next year, and then 3% in 2021.
There's no doubt that Help to Buy has been popular with first-time buyers over the last six years, but it's by no means the only option available.
When weighing up whether Help to Buy is right for you, consider these alternatives
Rates on are attractive at the moment, and taking out a traditional mortgage means you won't be limited to a new-build home. On the other hand, a fall in property prices could leave you at risk of negative equity.
These schemes can be a route on to the ladder in expensive city markets, but beware of the combined cost of your mortgage, rent and any service charge.
Guarantor mortgages come in all shapes and sizes, including products that require parents to use either their savings or property as security on their child's mortgage.
Help to Buy Scotland also allows first-time buyers and home movers to purchase a new-build property with a 5% deposit.
The scheme includes properties priced up to £200,000 and will run until at least March 2021.
The biggest contrast with the English scheme is that equity loans in Scotland are provided interest-free for their full term, rather than just the first five years.
Help to Buy Wales offers a 20% equity loan to first-time buyers and home movers.
As with England and Scotland, it's available on new-build properties, but with a price limit of £300,000.
The equity loan is provided interest free for the first five years.
Forces Help to Buy allows Armed Forces personnel to borrow up to 50% of their salaries on an interest-free basis to fund a house deposit.
The maximum loan available is £25,000, which must be repaid over 10 years.