Help to Buy equity loan scheme extended for second time
The government has pushed back the deadline by a further month to help buyers whose new homes have been hit by coronavirus delays.
The government has extended the deadline for the current Help to Buy initiative for a second time due to building delays caused by the coronavirus pandemic.
The so-called qualification deadline – the date by which construction of the property must have been completed – has been pushed back by a further month until 31 March 2021.
The deadline for legal completion for homes being bought under the scheme remains unchanged at 31 March 2021, although under certain circumstances it can be put back until 31 May 2021.
The Help to Buy equity loan scheme enables people to purchase a new-build home with just a 5% deposit, with the government topping this up with a 20% loan that is interest-free for five years.
The current scheme is being replaced by a new version, which is only available to first-time buyers, on 1 April this year.
Why is this happening?
The scheme is being extended for a second time due to the disruption caused to the housebuilding industry as a result of lockdowns and social distancing measures introduced to combat Covid-19.
Despite the qualification deadline having previously been extended by two months, there are still fears that many families hoping to take advantage of Help to Buy could miss out due to delays in their home being constructed.
As the current scheme ends on 31 March and the new one is only applicable to first-time buyers, there was a danger that many people could lose the chance to buy their home, through no fault of their own, if the deadline was not extended.
Who does it effect?
Although the deadline has been extended, it does not apply to everyone.
If you had reserved a property through the scheme by 30 June 2020, the deadline by which the property must be built has been extended until 31 March.
Under certain circumstances the date for legal completion can also be extended from 31 March until 31 May 2021, if building work was severely delay due to the first national lockdown. But housebuilders must receive approval for this delay from Homes England, the government’s housing coordinator.
If you reserved your home on 1 July 2020 or later, you will still benefit from an extension of the qualifying deadline until 31 March, but you must also be able to legally complete your purchase and receive the keys to your property to move in on that date.
If your home has not been built and you cannot move in on 31 March, or by 31 May for those who qualify for the later deadline, you will not be able to qualify for the Help to Buy equity loan.
Your housebuilder must unconditionally release you from your contract and refund your reservation fee. If you have already received an Authority to Proceed from Homes England, your builder is entitled to make certain deductions, but they must tell you about these first. If you have already exchanged contracts, they must also return your deposit.
The Help to Buy equity loan scheme in its current form will still close on 31 March.
What’s the background?
The new Help to Buy equity loan scheme, which is already open to applications, will only apply to first-time buyers.
It will also see the introduction of regional price caps on the value of a property that it can be used to purchase.
These caps range from £186,100 in the north east to £437,600 in the south east and £600,000 in London.
The scheme will run from 1 April 2020 to 31 March 2023.
Top three takeaways
- The government has extended the deadline for the current Help to Buy initiative for a second time
- The so-called qualification deadline has been pushed back by a month until 31 March 2021
- The deadline for legal completion remains unchanged at 31 March 2021, although under certain circumstances it can be pushed back until 31 May 2021
Q&A: 'With the stamp duty holiday due to end in March, we expect to see this housing market activity intensify'
Our Head of research, takes stock of the housing market and reveals info from the latest House Price Index.
Q. Gráinne, what’s happening to house prices across the country?
A. House prices are rising at nearly 4% a year, with the average home now worth £222,900. To put this into context, this is the highest level since August 2017. But the UK headline rate of growth hides a varied regional picture, with growth ranging from 5% in the north of England to 2.8% in the east of England.
House price growth in many areas has been prompted by a mismatch between supply and demand. We have seen demand levels rise by an average of 40% year-on-year, and in some areas by much more, and that’s despite the closure of the housing market during the first national lockdown.
But the flow of homes coming onto the market last year was just 4% more than in 2019. Put simply, there aren’t enough homes for sale to soak up demand – and this is putting upward pressure on house prices.
Our data and forecast models suggest annual house price growth will rise to 5% and then stay there for the first three months of this year.
Q. 2020 was a tumultuous year. So why was there record demand for housing?
A. The housing market was one of the bright spots of the economy last year. The pandemic and its subsequent lockdowns and restrictions led many people, who had spent longer than usual in their homes, to carry out a once-in-a-lifetime re-evaluation of their home and lifestyle, stimulating home moves and driving a search for space, such as an extra bedroom or office space.
This has been captured in our data, which reveals that there were 9% more new sales agreed in 2020 than in 2019. And because it typically takes three to four months to legally complete on a sale, a slice of these deals will spill over into 2021.
We also saw a shift in the type of buyers active in the housing market. More people in wealthier areas, where house prices are typically higher, are planning a move. On the other hand, some first-time buyers have been hit by many lenders pulling their mortgages for borrowers with small deposits.
All of which means that the total monetary value of sales agreed in 2020 is 26% higher than 2019, bringing the annual figure to over £300bn.
Drilling down into the data, it’s worth noting that sales activity in the south of England in particular is coming off a historically low base. So last year’s bounce-back in general housing market activity, combined with higher selling prices, means that the total value of homes sold in the south east and east of England is up 37% on 2019.
Q. What’s the most sought-after type of property?
A. While the value of all types of property is climbing, the search for space that I mentioned is having a knock-on effect on prices.
It has prompted the value of houses to rise twice as much as flats, with the average rate of year-on-year growth for houses standing at 4.3% compared with 1.8% for flats.
Q. Traffic on Zoopla surged by 70.5% on Boxing Day. What does this mean for the months ahead?
A. There’s traditionally a spike in interest in moving home on Boxing Day as people turn their attention to the year ahead. But this most recent seasonal surge was far higher than the 61% increase recorded on Boxing Day in 2019.
And the momentum seems to be sustained, with searches on Zoopla for December up until 26th up 33% on the same time period the year before.
With the stamp duty holiday due to end in March, we expect to see this housing market activity intensify as buyers focus their efforts on securing the tax saving.