An Update on the Government’s Help to Buy Equity Loan Scheme

On 31st July 2020, the Government announced some much-needed extensions to the existing Help to Buy equity loan scheme.  The deadline for new homes to be built to qualify for Help to Buy funding under the existing scheme was extended from 31st December 2020 to 28th February 2021.  The deadline for legal completion of the sale for most buyers remained unchanged and is still 31st March 2021.

In the case of buyers who reserved their home before 30th June 2020, Homes England has discretion to extend the date for completion of the build to 30th April 2021 and the legal completion from 31st March 2021 to 31st May 2021, where severe delays have been caused by the COVID-19 pandemic.  Such extensions will be considered on a case by case basis.  If these dates are not met, then the equity loan funds will not be available for the purchase and the builder must release the buyer from the Contract.

The existing Help to Buy scheme will otherwise end on 31st March 2021.  A new Help to Buy equity loan scheme will be available from 1st April 2021 to 31st March 2023, but it will only be available for first-time buyers and for houses with a market value up to new regional property price caps set at 1.5 times the average price paid by first time buyers in each region.  In the North East, the property price cap will be £186,100.

Developers wishing to use the new Help to Buy scheme must adhere to a range of new quality measures to improve customer experience and safety, including that homes must comply with the most recent energy efficiency methods, builders must be subject to adjudication that will be provided by the New Homes Ombudsman and the preceding voluntary scheme and builders with a Home Builders Federation star rating must clearly communicate that rating on related Help to Buy communications and advertisements.  In a nod to the on-going investigation into sale of leasehold properties by some developers, any ground rent on the sale of leasehold properties through the scheme must be restricted to a peppercorn rent.

The Help to Buy equity loan scheme allows people to buy a home with a deposit of as little as 5% of the purchase price with the Government providing an equity loan of up to 20%.  It has proven to be very popular since it was introduced in 2013 and, by March 2021, the Government expects to have invested around £22billion in the equity loan scheme, supporting up to be 360,000 households into homeownership.  There is no indication now that the Government intends to introduce any further Help to Buy equity loan schemes after March 2023.

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