An obscure completion date for help-to-buy loans could wreck people’s plans to get on the property ladder.
Sam Walker was looking forward to moving into his new home with his family once all the construction work was done. But then his plans looked at risk of collapse.
He realised he could lose the Bradford property he bought off-plan because the January 2022 completion date disqualified it from the scheme he used to buy it.
The problem emerged over confusion surrounding the new rules of the government’s help-to-buy loan scheme, which first-time buyers use to fund their new homes.
Those reserved this year must be fully built by 31 December for buyers to qualify for the loan of up to 20% of the sale price.
If completion is delayed by even a week, buyers will have to wait three months – until after 5 April – to reapply under the 2022 scheme. However, the deadline is not mentioned on the help-to-buy web pages and mortgage brokers say they have not been informed.
It’s the responsibility of developers to let purchasers know of the restriction, but some sales staff remain unaware of the requirement announced in February by Homes England, the public body that funds affordable housing.
“When we made our offer the developer, Miller Homes, referred us to a broker, New Homes Advice, to check we were eligible to apply for a help-to-buy loan and we were told that we were,” says Walker.
“We paid £500 deposit for the plot and were told to find a mortgage and a solicitor within four weeks. Five weeks later, after we had customised the interior online, Miller Homes said we couldn’t have the house after all because of the 31 December deadline.”
Walker says neither the solicitors or mortgage advisers involved in his purchase had heard of the deadline. “When we called Homes England and help to buy we were given conflicting advice, with some agents saying there was no December deadline and others confirming there was,” he says.
To qualify for the loan, applicants must be first-time buyers and the property must be a new-build by a developer registered with that year’s scheme. The property must also be priced below a threshold which varies around the country.
Under the old rules, completion had to follow within nine months of the loan being agreed, so Walker would have qualified.
The newly introduced completion deadline for construction, known as a long-stop date, has only been communicated to developers, even though it could scupper buyers’ financing plans.
Homes England told the Observer that the deadline was not mentioned on the government’s consumer guidance because it was a contractual commitment for developers when they were accepted on the scheme.
“As part of our communication, developers have been fully briefed with regards to this date, and will be communicating this to potential customers,” it says. “They should not be referring anyone to mortgage brokers if they cannot complete by the long-stop date.”
Miller Homes blamed confusion over the new rules for Walker’s experience. “As soon as we became aware of the long-stop date, we advised Mr Walker that we were unable to offer help to buy on the property and apologised unreservedly for any inconvenience this has caused,” it says.
“We are continuing to liaise with Mr Walker in the hope that we can find an alternative which would allow him to proceed with the purchase; however if that is not possible we have offered to reimburse all costs he has incurred.”
New Homes Advice, which had confirmed Walker’s eligibility for the loan, was unaware of the December long-stop date until the Observer got in touch. “This has not been communicated to mortgage brokers,” says a partner, Stewart Bartle.
“The rationale behind the deadline will be to ensure that properties are complete and ready to move in to by the end of the financial year, so they don’t run over into the 2022 funding allocations. But it seems harsh that a client could be caught in between these rules and dates.”
Brokers have not been officially briefed about the new rule, because the new help-to-buy 2021-23 scheme requires buyers to apply for a loan directly through one of three regional agents appointed by Homes England. However, the agents also appear confused by the new rules.
When the Observer called the advice lines of all three, staff insisted there was no December long-stop date, and that buyers could apply now for a loan for a property that completes in the new year. Homes England says it will provide the teams with further information to ensure they are fully briefed.
Miller Homes has since offered to hold Walker’s reservation until next April, when he can apply for a loan under the 2022 allocation, provided the company is approved for next year’s scheme by Homes England.
According to the National Federation of Builders, delays are likely due to shortages of building materials and labour.
“If homebuyers are getting conflicting advice, Homes England need to be clearer about their guidance and reassess their communication strategy,” says Rico Wojtulewicz, head of housing and planning policy for the federation.
“Developers must also be clear with homebuyers on their predicted practical completion dates. We will be speaking to Homes England to raise the issue of delays, so homebuyers are not disadvantaged.”
How help to buy works
The latest version of the help-to-buy scheme runs until 2023. Buyers in England can borrow between 5% and 20% of the full purchase price, or 40% in London. This means that buyers will need a smaller mortgage, which will usually be more affordable to repay.
There are, however, caps on the prices of homes that can be bought under the scheme – £600,000 in London and varying between £186,100 and £437,600 for the rest of the country. The loans are interest-free for the first five years. They can be repaid at any time, but must be settled when the home is sold, or the mortgage is paid off.
Source: News Now: Consumer Affairs