The Help to Buy: Equity Loan has helped more than 350,000 people get on the property ladder since 2013, but after being limited to first-time buyers last year, the scheme is finally coming to an end in March 2023, with intake of new applicants ending last month.
Many had hoped that an alternative scheme might replace it, but with economic uncertainty spreading across the country, it seems less likely the government will prioritise this.
So where does that leave the 80% of renters who dream of buying their first home? Well, there are still viable options. Shared ownership is one possibility – buyers can purchase a share of the leasehold of a property (generally 25% to 75%, but with some new schemes offering 10% shares) and pay rent on the rest.
The government’s First Homes scheme promises first-time buyers on lower incomes discounts of 30% to 50% on the full market value of a whole home – if, that is, they can find one. With just 1,500 of the discounted properties being rolled out over the next two years, this may prove difficult.
Similarly, the Rent to Buy scheme looks good on paper, offering subsidised rent for five years to help build a deposit, but, in reality, examples are rare.
So, assuming that first-time buyers are going to be without fiscal support going forward, they should start by reconsidering the type and location of property they are seeking. Looking further afield can cut costs dramatically.
One could consider a move to Shildon in County Durham, where they have the lowest house prices in the country. Or move a little further from the centre of London; the average asking price in Barking and Dagenham is currently £356,421. Or most commonly, look to the commuter belt. The average price of a house in Luton is £293,573.
Offering smaller homes can also help people get a foot on the ladder. For example, 37 sq m of living space can comfortably accommodate a couple.
With prices steadily rising, first-time buyers may need to look at higher-loan-to-value mortgages – 95% is now available through the government’s Mortgage Guarantee Scheme (and directly with lenders). Even 100% loans are possible, with support from family, although the cost-of-living crisis is squeezing the ’bank of mum and dad’ as well.
But perhaps there’s another option: rent. Several measures are under way to improve the private rented sector, with the government leading on the quality and consistency of private lets.
Build to rent (BTR) offers a unique experience – purpose-built rental schemes offer a wide range of extras at a single, monthly cost, giving a great standard of living at a fixed rate, helping buyers to budget and save.
With the general economic outlook so uncertain, some first-time buyers might simply bide their time somewhere a little more comfortable than a shared flat or their childhood bedroom, and BTR certainly fits the bill.
Santhosh Gowda is chairman of developer and operator Strawberry Star Group