The deadline for the Help to Buy scheme has been extended to the end of May to compensate for delays in construction due to the Covid-19 outbreak.
Homebuyers in the UK using the scheme will now get two extra months to legally complete their purchases.
Here’s everything you need to know.
How the Help to Buy scheme works
The government established the Help to Buy scheme in 2013 to help out first-time buyers who want to get on the property ladder but can’t save enough for a deposit.
Under this scheme, a buyer only needs to raise a 5% deposit. The government then lends up to 20% (40% in London) of the property’s total value.
The loan is interest-free for the first five years. In the sixth year, buyers have to pay interest at a rate of 1.75%. After that, it rises every year in line with the Consumer Price Index plus 2%.
The Help to Buy scheme essentially allows buyers to attract a better mortgage rate since they are borrowing less.
In the seven years it has been running, the scheme has helped more than 270,000 people in the UK purchase homes.
Application for the current scheme closed on 15 December 2020. It’s being replaced on 1 April by a new version which will only be available to first-time buyers and which is subject to regional price caps. The new scheme will run until 31 March 2023.
Why is the Help to Buy deadline being extended?
This is actually the third time the government has extended the scheme because of Covid-19 delays.
According to the BBC, Covid-related delays mean that more than 16,000 houses were at risk of not being completed on time.
The leading causes of delays during this Covid-19 period include:
- Workers needing to self-isolate
- Supply lines slowing down
- Overseas labour needing to quarantine first
- Furlough of some traders
When is the new Help to Buy deadline?
With the Help to Buy deadline extension, buyers now have until 31 May 2021 to legally complete their purchases.
There is also another reason for buyers to want to wrap up purchases soon. The stamp duty holiday for homes with a value of up to £500,000 for which a purchase was completed between 8 July 2020 and 31 March 2021 is ending at the end of March 2021.
From 1 April 2021, stamp duty is reverting back to pre-coronavirus rates. Those whose properties will not be ready by then face the prospect of significant extra costs.
Is another deadline extension likely?
Even with the current extension, some buyers worry that it might not be enough.
But the government has already ruled out further extension of the Help to Buy deadline. According to the government, “there will be no more extensions, so we are asking home builders to continue to build at pace.”
More information
More information about the Help to Buy scheme, including who is eligible and how to apply can be found on the Help to Buy website.
For everything else related to mortgages and homeownership, check out our mortgages section where you’ll find great and insightful content on topics such as how to choose a mortgage broker.
