Delays in the building of new homes caused by the Covid-19 pandemic may mean thousands of property buyers will lose out if their homes are not ready before the end of the current Help to Buy loan scheme.
The government launched the Help to Buy equity loan scheme in 2013 offering loans of up to 20 per cent of a property’s value interest-free for five years when buying a new home from a government-approved builder.
After five years interest is charged at 1.75 per cent, rising annually in line with the Consumer Prices Index (CPI) of inflation, plus 2 per cent. The amount you owe remains fixed at the same percentage of the property’s value, whether it goes up or down.
This scheme is due to end on the 31 March 2021 to be replaced by a tougher scheme which is open to first time buyers only.
Without the 20 per cent loan many would-be-buyers will have their mortgage offers withdrawn and face losing thousands of pounds in solicitors’ and mortgage brokers’ fees.
Delays to home-building.
Some smaller developers have said that they cannot complete properties by the 31 March because of the pandemic has caused excessive staff absence and has meant they have had to substantially change their working practices.
The government has already extended the scheme from 28 February to 31 March. However, in December 2020, Homes England, a government agency, said that the pandemic had caused an average delay of three to eight months on build times meaning the government’s extension to the scheme of only a month will have little effect.
A separate deadline for people who had reserved their homes before 30 June 2020 is to remain on May 31. They were given more time because of the complete shutdown of the property sales market last spring.
Call to move the deadline
If buyers cannot take advantage of the scheme, housing developers risk having plots they cannot sell. They are calling on the government to extend the deadline and pause the introduction of the less favourable new scheme.
The revised scheme is subject to a regional price cap – £224,400 in the North West – and is available to first-time buyers only.
The government changed the scheme following criticism that developers were getting rich from the scheme. There were also concerns that the buyers using it did not need the help and were buying bigger homes than they needed.
A spokeswoman for the ministry for housing did not rule out extending its deadline, saying: “While construction can continue during the lockdown, we recognise there have been delays caused by the pandemic and we understand the difficulties this has caused some people,
“That’s why Homes England is giving builders more time by not enforcing the February 28 build deadline so only requiring sales to be completed by March 31, or May 31, 2021, for reservations made before June 30, 2020. We are continuing to monitor the situation.”
With the 31 March deadline fast approaching developers and buyers will continue to lobby for an extension to the scheme.