The Help to Buy Equity Loan scheme was first introduced in 2013, though it has evolved over the years with the latest guise seeing the introduction of regional property price caps.<\/p>\n
Essentially, it offered first-time buyers the chance to purchase a new-build property with a minimum 5% deposit. They could also use an equity loan of up to 20% of the purchase price \u2013 or 40% in London \u2013 where the loan is interest-free for the first five years.<\/p>\n
Just over 361,000 properties were bought under the scheme, with the total value of equity loans totalling \u00a322.5bn.<\/p>\n
Mark Robinson, managing director at Albion Forest Mortgages, says he\u2019s \u201camazed\u201d the government \u201chas not brought in a robust, widely available alternative to Help to Buy\u201d.<\/p>\n
Robinson said: \u201cThis is still needed in my opinion, and could leave some buyers short.\u201d<\/p>\n
While there are no comparable alternatives, here are 10 options and schemes now available to first-time buyers\u2026<\/p>\n
1) Bank of Mum and Dad<\/strong><\/p>\n Advice firms are reporting that the current cost-of-living crisis means many parents have already gifted or are planning to gift cash to their children or grandchildren while they are still alive. One of the main reasons cited is to provide offspring with a house deposit.<\/p>\n The HomeOwners Alliance (HoA) explains that a \u2018gifted deposit\u2019 \u2013 unlike a loan \u2013 is given with the understanding that the money doesn\u2019t need to be repaid. The person gifting the money has no right or legal interest in the property being bought.<\/p>\n Lenders may treat gifted deposits in different ways, for example only from immediate relatives, and a lender and conveyancer will need to know as part of anti-money laundering checks. You may need to sign a gifted deposit declaration.<\/p>\n By increasing the deposit put towards a property, you won\u2019t need to borrow as much money and you may have a bigger choice of deals at cheaper rates.<\/p>\n However those gifting need to be aware of the inheritance tax rules. You can give away up to \u00a33,000 a year, but allowances can be carried over from previous years (\u00a312,000 total if no other gift has been made). But inheritance tax may loom for larger gifts and if the donor dies within seven years. The gift would form part of the estate and if it is worth more than \u00a3325,000, 40% tax is due on the excess.<\/p>\n 2) Family Springboard Mortgage<\/strong><\/p>\n If a cash gift isn\u2019t an option, you could consider a Family Springboard Mortgage. These allow FTBs to get a mortgage without a deposit. Instead, parents pay a 10% deposit into a savings account linked to the mortgage.<\/p>\n As long as the child keeps up with repayments, the parents get their money back with interest.<\/p>\n As an example, Barclays\u2019 5 Year Fixed Family Springboard: Purchase Only is set at 6.20% (5.5% APRC) for a 95% LTV (minimum loan is \u00a35,000, maximum is \u00a3500,000).<\/p>\n 3) Guarantor Mortgages<\/strong><\/p>\n With a Guarantor Mortgage, borrowers can usually take out a larger mortgage, even up to 100% of the property\u2019s value. They are typically aimed at lower earners, those with smaller deposits, poor credit score or little to no credit history, HoA explains.<\/p>\n It means getting parents or a close relative involved who will take on some of the risk and cover any repayments missed by the buyer.<\/p>\n According to the HoA, this usually involves people offering their savings or their home as security, while not owning a share of the property as they won\u2019t be named on the deeds. If the borrower is unable to repay, it could mean the guarantor loses their savings or even their own home, depending on what they used as security against the mortgage.<\/p>\n 4) Shared ownership<\/strong><\/p>\n Shared ownership lets FTBs purchase between 25% and 75% of a property and rent the rest from a housing association \u2013 increasing the stake they own over time in a process known as \u201cstaircasing\u201d.<\/p>\n Angela Kerr, director of the HoA says that while shared ownership \u201cis a good option for many, the homebuying mantra of \u2018buyer beware\u2019 couldn\u2019t be more apt\u201d.<\/p>\n She says: \u201cResearch every detail, read reviews and get a solicitor who can explain the contract. The details, costs and restrictions involved vary by provider so research each one on its individual merits and read the small print of your lease. Most notably staircasing to increase ownership in your property is expensive and time consuming.\u201d See the HoA\u00a0Shared ownership<\/a>\u00a0guide for more information.<\/p>\n 5) First Homes scheme<\/strong><\/p>\n Launched last year, the government\u2019s\u00a0First Homes scheme<\/a>\u00a0for local FTB and key workers aims to help people onto the property ladder with a minimum 30% discount on the market price of certain new builds. It requires a minimum 5% deposit (on the discounted purchase price) and is for those earning less than \u00a380,000 per year (\u00a390,000 in London).<\/p>\n The discounts will apply to homes in perpetuity. It applies to property worth up to \u00a3250,000 across England and \u00a3420,000 in London after the discount has been applied (or lower if set by the local authority).<\/p>\n It\u2019s offered on a limited number of plots and 1,500 First Homes are expected to be rolled out over the first two years in over 100 locations. The government said First Homes should become available on new construction sites across England as developers and local authorities \u201cbegin to incorporate new planning policies\u201d.<\/p>\n You should check whether the builder is offering the scheme on the development where you want to buy. There\u2019s no application deadline.<\/p>\n Kerr says: \u201cIn June last year, the government amended its national planning policy to state that at least 25% of affordable homes delivered through the planning system should be First Homes. But we\u2019re not clear what progress has been made to deliver against the scheme.<\/p>\n The government was announcing new sites whenever they came online but it\u2019s been quiet since 201 First Homes were announced in November last year in Hampshire. It really is a policy that\u2019s trickle-feeding homes to a lucky few rather than one that will address the affordability issues faced by first-time buyers.\u201d<\/p>\n 6) Mortgage Guarantee scheme<\/strong><\/p>\n The\u00a0Mortgage Guarantee scheme<\/a>\u00a0was introduced in April 2021 to increase the availability of 95% loan-to-value mortgages after they were withdrawn during the pandemic.<\/p>\n It offers lenders the option to buy a guarantee on a mortgage where the borrower has a deposit of only 5% (maximum \u00a3600,00 property price). It compensates lenders for a portion of net losses suffered in the case of repossession. It\u2019s not for new build properties.<\/p>\n Uptake of the scheme is low as it supported around\u00a0\u00a33.2bn in loans<\/a>\u00a0since launch, with the value of properties pegged at \u00a33.42bn, and around 18,000 total completions.<\/p>\n The scheme is due to expire at the end of this year but reports surfaced last month that the former Chancellor, Kwasi Kwarteng, was in meetings with banking leaders to discuss its\u00a0extension<\/a>.<\/p>\n As an example, NatWest, RBS and Barclays offer the Mortgage Guarantee scheme.<\/p>\n 7) Standard 95% mortgage\/5% deposit lender deals<\/strong><\/p>\n If you\u2019re struggling to get a deposit together in the first place, lenders do offer 95% LTV mortgages meaning you just need to stump up a 5% deposit.<\/p>\n According to data site Moneyfacts, the number of 5% deposit deals from lenders has plummeted over the course of 2022, not helped by the disastrous effects of the mini Budget which sent markets (and mortgage rates) into a frenzy in September.<\/p>\n In January, there were 347 95% LTV deals, which dropped to 274 in September. In the aftermath of the budget, this number fell to 132 on 1 October and stood at 135 just over a week ago.<\/p>\n 8) Deposit Unlock Scheme<\/strong><\/p>\n Offered by the Home Builders Federation, the recently launched Deposit Unlock scheme allows FTBs and home movers to buy a new build home with a 5% deposit.<\/p>\n Under this scheme house builders pay to insure the mortgages instead of the government topping up a buyer\u2019s ability to afford repayments with an equity loan.<\/p>\n According to the HoA, builders then use some of the money from selling the homes for this purpose with the aim of making lenders more comfortable about offering high LTV mortgages on new builds.<\/p>\n Kerr says Deposit Unlock \u201cis quite a savvy scheme by developers\u201d but adds it will \u201conly appeal if homebuyers are struggling to get their own 95% mortgage and buy on the open market\u201d.<\/p>\n Further, just three lenders are on board \u2013 Accord, Nationwide and Newcastle Building Society.<\/p>\n 9) Longer mortgage term<\/strong><\/p>\n Back in the summer, the government under Boris Johnson was reportedly looking at \u201ccreative\u201d\u00a050-year mortgage terms<\/a>\u00a0enabling people to borrow more and still afford repayments. But on the downside, it means people could be paying off their mortgage for most of their lives, with it being passed between generations.<\/p>\n While nothing\u2019s come of this, borrowers typically opt for two, three, five or 10-year fixed mortgage deals.<\/p>\n Habito (Habito One) offers a 40-year term, allowing borrowers to fix their rate and monthly repayments for the entire term of the mortgage. Paula Higgins, chief executive of the HoA, says these longer mortgage terms \u201ccould also be an option for some\u201d.<\/p>\n 10) Play the waiting game and consider opening a Lifetime ISA<\/strong><\/p>\n Kerr says that just as Help to Buy \u201chad its shortcomings, so do all the alternative options now rising up to fill the gaps\u201d.<\/p>\n She says: \u201cOur advice to all first-time buyers is, if you can take a little longer to save, or are lucky enough to be able to leverage money from your family in some way, then do. It\u2019s far better to buy a home on the open market than buy using one of these (often complicated and limited) purchasing schemes.\u201d<\/p>\n