The original deadline of 31st December for Help to Buy newbuilds to be completed by has been extended until the 31st January 2023 in a decision by Homes England that will give some leeway to building contractors who indicated it would not be possible to complete some projects by the end of the year. The decision comes in time to allow warranties to be claimed on newly built properties in time for the total wind down of the Help to Buy scheme in March 2023.
Help to Buy scheme
Originally devised in 2013 as a way to help first time buyers get on the property ladder, the project was intended to end in 2017 but has been extended twice with a final end date of 2023. There are several financial products and schemes covered by the term Help to Buy, but the most significant and perhaps impactful of these has been the Help to Buy equity loan scheme that involves the buyer placing a 5% deposit that is then matched up to 20% by the government as an equity loan that remains interest-free for the first five years. The help to buy equity loan repayment sits alongside a traditional mortgage which is normally used to finance the remaining cost of the property.
Criticism of the Help to Buy scheme
While considered by many to be one of the most significant investments by the government into addressing housing inequality, the scheme has also been heavily criticised by bodies such as the International Monetary Fund for its potential contribution to artificially rising house prices. By focusing on increasing access to purchase funds, this has boosted the housing market without supporting buyers in real terms.
Changes were made at each extension of the Help to Buy scheme that aimed to minimise some of this impact, in part by limiting the equity loan offers to first time buyers only and introducing regional price caps to somewhat minimise artificial inflation. However, in the context of a housing supply crisis, many have seen the scheme as sidestepping the central issue of housing supply itself which is now one of the primary focuses of the Department for Levelling Up, Housing and Communities that oversees Housing England.
Impact on conveyancing
Many conveyancers such as Sam Conveyancing have been hearing from clients concerned about newbuild properties looking unlikely to be finished in time for the 31st December deadline, so this news will come as a welcome relief for both conveyancers and their clients looking to ensure property warranties are secured before the final wind down of the scheme.
There is concern, however, for what will be available for first time buyers in the absence of this scheme without any change to the state of the housing market. The Deposit Unlock is the closest equivalent that many conveyancers are noticing interest in, which is provided by the Home Builders Federation and supports first time buyers in securing a new-build property with a 5% deposit.
Such schemes are essential in the context of a housing market that, despite recent small dips in prices, is still projected to continue growth well into 2023 alongside rising interest rates that make many mortgages less accessible in the current economic climate.