Property Press Online

The government are set to roll out a new help to buy scheme in April 2021, allowing first time buyers to get onto the property ladder with only a 5% deposit with an added 20% (or 40% if you’re in London) from the government.

But there is less knowledge of the potentially huge repayment at the end of the scheme, which begs the question – are only the government benefitting…

About the scheme

The new help to buy scheme allows first time buyers to buy a house with just a 5% deposit, with the government adding in 20%, or 40% if you’re in London. The scheme also means first time buyers don’t need to repay the loan until the have sold the property.

But when it comes to repaying the loan, the amount paid back will have increased.

Instead of paying back the sum of the original loan, the amount paid back will now be the borrowed percentage of the sale value of the house.

This means if you got a 20% loan, you would be paying back to the government 20% of the appreciation value of the house.

What does this mean?

If you’re in London and bought a house at the full price of the ‘help to buy cap’ at £600,000, the buyer would need £30,000 for deposit and the government would add in £240,000.

According to research by YES Homebuyers, over the last 5 years property prices have increased by 3.2%. If prices are to follow that trend, the house bought for £600,000 would be worth £680,787 in 5 years’ time.

This would result in the repayment amount increasing by £32,315, to £272,315 instead of the original £240,000.

According to further research by YES Homebuyers, other than London, the next two places that would see the biggest increase in their repayment over 5 years would be the East and South East of England.

These numbers do lead you to wonder if the help to buy scheme is really just helping first time buyers…

Who really benefits?

When looking at the scheme and the repayment amounts in closer detail, a scheme which is meant to help first time buyers get on the housing ladder, starts looking as though the only party benefitting ultimately is the government.

Although the government are helping first time buyers to take that big step onto the property ladder, it could be seen as the government profiting off those who are desperate to buy a house.

There’s no denying a ‘help to buy’ scheme is great for helping first time buyers make their next big step, but there has been much less said about just how big the increase is between the loan and the repayment amount.

The question is, is the scheme worth an increase in repayment, in excess of £32,000, or is this just another way for the government to gain some money?