The Help-to-Buy Scheme was started in January 2014 and since that time, according to the Welsh Government over 13,400 homes have been bought using the scheme in Wales. In England a parallel scheme ran, but this was closed to new applications in October 2022. The current scheme in Wales ran from April 2021 and is due to end in March 2023 for new applications. There’s good news though, The Welsh Minister for Climate Change, Julie James, announced in December 2022 that the Welsh scheme would be extended until March 2025 with some modifications to the existing scheme.
What is the current Welsh Help-to-Buy Scheme?
Under the current scheme the buyer can apply to purchase a new build property from a registered builder. The maximum value of the property cannot exceed £250,000 and the buyer needs to be able to afford to fund at least 80% of the property price through a repayment mortgage obtained from a qualifying lender and put down at minimum of a 5% deposit. The property being purchased must be the only property the applicant owns and the purchaser must not sub-let any part of the property bought using the scheme. The Welsh Government will then, if the borrower is approved, provide an equity loan for up to 20% of the property value. This is interest free for the first 5 years of the loan term. After the 5 year period interest is paid at the value of the prevalent Retail Price index plus 1%. So, if RPI is 5% the borrower will pay 5%+1% interest. The loan has to be paid off within 25 years. When selling the property, at any time before the loan is paid off, the Government will take a percentage of the sale value based on how much was lent in the first place. So, if the Government lent 20% on a £100,000 house (£20,000) and the property then sells for £150,000 the Government will take 20% of £150,000, which is £30,000.
How will the Extended Scheme work?
In most ways, it will be the same as the existing scheme with two significant changes:
- The price cap for the property being bought will be raised to £300,000 to take into account rising house prices in Wales.
- Any property purchased under the new scheme will need to have an EPC rating of at least B to make sure it is energy efficient.
The extension to the scheme will be seen as a good thing for first time buyers who might otherwise struggle to get on the property ladder.
