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Third of homebuyers ineligible for new Help to Buy

More than a third of homebuyers who would have previously qualified for the government’s Help to Buy scheme, will be ineligible in 2021, under rules outlined in this week’s Budget.

In his speech on Monday (29 October) the chancellor announced Help to Buy will be extended until 2023 but revised rules mean only first time buyers and homes within new regional price caps will be eligible.

This means 38 per cent of homebuyers who used Help to Buy to buy a home in 2018 would no longer be eligible to use the scheme, research from a home moving quotes provider has found.

In London, assistance will be limited to homes worth up to £600,000, while in the north east of England, homes beyond £186,100 will be ineligible.

The caps have been calculated at 1.5 times the average first time buyer price, as estimated by government forecasts.

Rob Houghton, CEO of reallymoving.com., said: “Our data shows that around 38 per cent of people who have used Help to Buy Equity Loans so far this year would no longer qualify after the changes in 2021, indicating that the revised scheme is quite rightly much more targeted towards first time buyers who need help onto the first rung of the property ladder.”

Research released by the home moving quotes provider earlier this month suggested first time buyers using the government’s scheme were paying on average 8 per cent more than those buying new homes without the scheme.

According to data collected from 41,000 of its first time buyer clients, the firm found those purchasing a new build home without Help to Buy paid on average £257,908, compared with £277,968 paid by those using the scheme.

Mr Houghton added: “Despite its improvements, we’re pleased to see the scheme being scaled back, given that our analysis suggests there’s a risk that the Help to Buy Equity Loan scheme encourages higher prices, more than it helps first time buyers get on the ladder or encourages new properties to be built.”

Paul Gibson, a chartered financial planner and managing director of Granite Financial Planning, also said he believes the Help to Buy scheme has not worked as well as it should have and has driven property prices up.

He said: “The scheme has not really worked as intended as evidenced by the fact that those using the scheme are paying more.”

“I don’t think the government should be subsiding house builders but do feel more needs to be done to help first time buyers in general. Perhaps more stringent tax rules for those with second homes would release more capacity on the market as a starter.”

the price caps set by the government are:

Region                                    Price Cap

North East                               £186,100

North West                              £224,400

Yorkshire & The Humber         £228,100

East Midlands                         £261,900

West Midlands                        £255,600

East of England                       £407,400

London                                    £600,000

South East                               £437,600

South West                              £349,000

Source: FT Adviser