The Help to Buy scheme was launched in 2013. The purpose of the scheme was to try to encourage movement at the first time buyer end of the property market following the banking crash in 2007/8 which had a seriously negative impact on the UK property market.
The scheme worked by the government agreeing to take on some to the risk if borrowers defaulted on their mortgage payments. The purpose of the guarantee was to prompt lenders to offer 5% deposit mortgages. Some 86,000 homeowners have used the scheme since its launch.
Many lenders have called for the extension of the scheme but the Chancellor, Phillip Hammond, has confirmed that the scheme will close at its original termination date of 31 December 2016.
So if any borrowers want to take advantage of the scheme, they must do so by the end of 2016.
This announcement does not affect the Help to Buy ISA. This will continue to be available until 2019 although this scheme has been in the news recently for different reasons. First-time buyers can save up to £200 into the ISA every month and the state adds 25% on top, to help a buyer build up a deposit. The minimum the buyer needs to save to get the bonus is £1,600 (so a £400 bonus), and the maximum bonus is £3,000.
The Telegraph has recently quoted what it called the 'Help to Buy ISA scandal'. Some 500,000 people have taken out a Help to Buy ISA on the basis that it was sold as a means of providing 'direct government support' for a deposit for a home. However a glitch in the rules means that the buyer's solicitor cannot actually drawdown the 25% government bonus on the savings in the ISA until completion has taken place.
This means that although the money comes to the buyers eventually, they will have to find the money at the time of purchase - they very thing that first time buyers and those on lower incomes fund it difficult to do.
The equity loan scheme for new build properties will also be available beyond end 2016.
To discuss this or any other property related issue, contact us.