Deposit Unlock New Build Scheme As Help to Buy Ends

The Help to Buy Scheme ends in England in March 2023 for purchase completions where latest applications had to be in by was October 2022.  In Scotland the Help to Buy Scheme ended in 2022 replaced by shared equity schemes, in Wales Help to Buy has been extended to 2025 and in Northern Ireland there are different types on shared equity schemes still.

Help to Buy was a government scheme to help first-time buyers get a property with just a 5% deposit.  You could borrow 20% of the purchase price (40% in London) from the government, interest-free for five years.  There were purchase price caps on the scheme for different regions e.g.  North East £186,100 and London £600,000.  The downside:

From year 6, you’ll be charged 1.75% which will increase by the Consumer Price Index (CPI) plus 2% (1% if you took the equity loan before December 2019).  E.g., if Year 6 is today then your new interest rate on previously interest free government loan is 1.75% + 10.2% CPI Inflation = 1.93% + 2% = 3.93% pa (still fair value compared to current base rates at 4% pa and mortgage rates of 5% pa.

The equity loan must be repaid after 25 years, or earlier when/if you sell your home.  This is paid back as 20%/40% of value of the property whether values have increased or decreased i.e., if you borrowed 20% and the  property has increased in value by £100,000, you would be required to pay back the original loan plus an extra £20,000 i.e., 20% of the increased value.  No wonder the government has done so much to boost the value of house prices over the last 10 years.

Deposit Unlock Scheme  https://deposit-unlock.co.uk/

• Enabling you to buy a new build home with just a 5% deposit for first time buyers or movers.
• 39 of the leading new home builders have signed up to scheme.
• If saving for a deposit is preventing you from taking the step to buying your first home, or moving to your next home, Deposit Unlock is a scheme that enables you to buy a new build home with just a 5% deposit.
• You benefit from an insurance-backed guarantee, allowing you to access competitive mortgages rates.
• Available on new-build properties up to the price of £833,250 with no regional price cap restrictions.
• You own 100% of the property and not like the 80% or 60% under Help to Buy.
• Energy Efficient:  New build properties benefit from energy performance certificate requirements of a minimum B and the new Future Homes Standard to reduce CO2 emissions produced by new homes by 75% to 80% by 2025.
• Fire Safety Regulations: New build properties benefit from the latest fire safety requirements.
• Deposit Unlock is currently available with participating bank lenders including Nationwide Building Society, Accord Mortgages and Newcastle Building Society (as at November 2022).

We have mixed views on new build properties.  All of the above positive points help but there is a gamble the property prices will rise in value as new builds have a premium attached t them and if you buy ‘at the top’ of the market and property prices fall, which may be the case in coming years, you may then be trapped with negative equity for a few years until property prices recover.  That said, Deposit Unlock may help those who are trying to get on the property ladder.

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