First time buyers may well be wondering what will replace the government's flagship Help to Buy scheme, which has now closed to new applicants. While there won't be a new help to buy scheme, there are lots of alternatives. Here we list 14 options available now, including government schemes, private initiatives and mortgage solutions.
The end of the Help to Buy Equity Loan scheme has left lots of first-time buyers wondering what will replace Help to Buy? We look at how the scheme worked, why it has ended and the 15 different schemes and options replacing Help to Buy now.
The Help to Buy Equity Loan scheme (2021-2023) ended on 31st March 2023. The scheme let you buy a new build home with a 5% deposit. Users of the scheme could borrow an equity loan from the government of up to 20% of the property’s value, or up to 40% if the property was in London. This was interest-free for the first five years. And you then needed to get a mortgage for the rest.
If you have purchased a home with Help to Buy you may be interested in our guide on Remortgaging a Help to Buy property.
The main reason for the scheme was to help first time buyers with affordability. At the time it launched, lenders were unwilling to extend their risk and lend to first time buyers with lower deposits. The government therefore stepped in with the Help to Buy schemes to build lender confidence and to get house builders building for first time buyers.
However, over the years it has become clear that the scheme was propping up the profits of house builders and contributing to inflating house prices. There was the added problem that new build properties depreciate in the same way that a brand new car does, so first time buyers were often paying over the odds for their first home.
So what will replace Help to Buy? Are there many Help to Buy alternatives available to first time buyers? Yes, there are already a number of options and schemes available that you may wish to investigate.
The government’s mortgage guarantee scheme was launched in 2021 after the pandemic meant lenders retracted all 95% mortgages. Now the government offers lenders a guarantee to encourage them to lend again. Once you have found a property (which must cost less than £600,000) you want to buy, to access the mortgage guarantee scheme, you need to find a mortgage from one of the participating lenders. A good mortgage broker can walk you through your options and find the best deal for you. The scheme is due to end June 2025.
With Shared Ownership, you buy a share of a property (between 10%-75%) and pay rent on the rest. So you’ll need a smaller mortgage and smaller deposit than if you buy on the open market. And you could increase your ownership stake in the property over time. These schemes are provided by housing associations or private developers. However, 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. Buying up more shares in your property can be expensive and while you only own a percentage of the property you will be required to pay the full maintenance and repair costs. Read more about the pros and cons of the shared ownership scheme.
The government’s First Homes scheme works by offering newly built homes to local first time buyers, including keyworkers, with a discount of at least 30% compared to the market value of equivalent properties.
According to the government, homebuyers can save on average £70,000; making buying a home much more affordable. In some areas, up to a 50% discount is being offered. This discount stays on the First Home forever. This means that, every time the property is sold, the new buyer benefits from the discount. But the eligibility criteria is different for different local authority areas and the number of First Homes being built is extremely limited. Read more in our guide to the First Homes Scheme
A Lifetime ISA – or LISA – is a no-brainer. Designed to encourage people to save for their first home or their retirement, anyone aged 18-39 can open an account and save up to £4,000 each tax year. The government will then give you a 25% bonus on your contributions, up to a maximum of £1,000 per year. This government top up definitely makes it a product worth considering to boost your deposit savings. But you should shop around for the accounts offering the best rates and be aware of the pitfalls when it comes to withdrawing your money by reading our guide to the Best Lifetime ISAs.
Rent to Buy allows you to rent a home at a minimum of 20% below the market rent for at least 5 years. This allows you to save for a deposit to put towards your first home. After the 5 years, the landlord can agree to extend your rental agreement, and you can continue on an Intermediate Rent basis, they can sell giving you first refusal, or the landlord can keep and convert the home into rented housing. If your landlord agrees, you can continue to rent the home but not using Rent to Buy. Read our guide on Rent to Buy for more options.
If you’re a council tenant in England the Right to Buy scheme could help you buy the home you rent with a discount of up to £87,200 (£116,200 in London). Read more about whether you’re eligible in our guide on Right to Buy.
Nationally, house prices are up 11% in the last year. Against this backdrop, mortgages that require a deposit of only 5% can sometimes be the only way that some first-time buyers on tighter budgets are able to afford a property on the open market. And the good news is there are still 95% mortgages available. So speak to a fee-free mortgage broker and ask them to shop around for the best first time buyer mortgage deals for you, while you squirrel away your 5% deposit.
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Find a mortgageAccording to Legal & General, 49% of first-time buyers aged under 35 get help from the Bank of Mum and Dad to buy a property. The majority of parents give their children the gift of cash to make up the shortfall in their deposit and boost their borrowing power so they can access a cheaper mortgage deal and/or borrow more. Most banks will accept a deposit that has been gifted (or partly gifted) but they may ask for written confirmation from you stating it is a true gift. Find out more about what you need to declare in our guide Gifted Deposits Explained.
With a guarantor mortgage someone, usually a parent, will take on some of the risk of the mortgage by acting as a guarantor. This usually involves them offering their savings or their home as security against the loan and committing to making the mortgage payments if the borrower defaults. The main advantage is the borrower can take out a larger mortgage than if they apply for a traditional mortgage on their own, sometimes 100% of the property’s value.
Lenders that offer guarantor mortgages include Newbury Building Society, Loughborough Building Society and Tipton & Coseley Building Society. And while they may not call their products guarantor mortgages, Halifax offer a Family Boost mortgage and Barclays offers a Springboard Family Mortgage that operate in a similar way. Find out more in our guide about this option in our guide Guarantor Mortgages Explained and speak to a fee free mortgage broker to discuss all the options.
A catchy title it is not! But JBSP mortgages are an attractive option for some borrowers as they don’t need someone to put up savings or property to secure the mortgage. With these mortgages, you apply with someone who’s willing to accept joint responsibility for making mortgage payments without having a legal claim to the property. With only the child’s name on the property’s deeds, any stamp duty surcharge can be avoided.
However, both applicants will need to pass affordability checks to show they can afford the mortgage payments. And unlike guarantor mortgages, some of which are offered at 100% LTV, these mortgages will need the buyer to put down a deposit. To find out more, it’s a good idea to speak to a mortgage broker.
In May 2023, Skipton Building Society launched a 100% LTV mortgage called the Track Record Mortgage. This enables first time buyers and those who haven’t owned a property in the UK in the last 3 years to take out a no deposit mortgage, provided they have a minimum 12 month proven track record of paying rent. Skipton’s 100% mortgage has a maximum loan size of £600,000. The monthly mortgage payment must be equal or lower than the average of the last 6 months rental cost. And its maximum loan to income ratio is 4.49. For more details, see 100% mortgages – should I get one?
With this scheme, house builders have grouped together to offer something very similar to Help to Buy. Whether you’re a first-time buyer or home mover you can buy a new build home from a participating house builder with just a 5% deposit using a mortgage offered by a participating lender. But you will have limited mortgage options at the moment as only three lenders have joined the scheme. See our guide Deposit Unlock for more details on how this works.
The Own New Rate Reducer scheme allows you to buy a new build home with a mortgage and pay a lower mortgage rate than if you buy on the open market with a traditional mortgage. When you choose your property, the developer will agree to contribute 3% or 5% of the purchase price. House builders do this as an incentive for you to buy their properties. The developer’s contribution goes to your mortgage lender, via Own New. The lender will take the developer’s contribution of 3% or 5% and offset it against the mortgage interest to reduce your monthly payments for the first 2 or 5 years, depending on the length of your initial term. See our guide for more information on the Own New Rate Reducer scheme. To buy a home through Own New you’ll need to speak to an approved mortgage broker. Speak to our fee-free mortgage broker partners L&C today to find out more.
Shared ownership and First Homes are two flagship schemes which the government are actively promoting as a replacement to Help to Buy. Shared ownership options are readily available now across the country while First Homes is quite a new scheme dependent on the government and house builders to start delivering.
Right to Buy exists in England and Northern Ireland. This scheme is designed to allow council tenants to buy their council home at a discount. Approximately 2 million homes have been sold in this way over the last 30 years. And in June 2022 the then Prime Minister Boris Johnson announced the Right to Buy scheme will be extended to include millions of Housing Association tenants – but it is unclear whether that policy is being carried forward.
Since the Help to Buy loan is interest-free for the first five years it’s advisable to repay as much as you can before this period ends.
You can make part repayments, known as “staircasing”, to reduce your ongoing costs when the interest-free period ends, and to start paying off the equity you’ve borrowed. Staircasing will also mean that you’re entitled to a greater share of the total sale proceeds when you sell.
For more advice on repaying your Help to Buy equity loan before selling read our guide on Selling a Home with a Help to Buy Equity loan
