With no signs that the ‘Help to Buy’ scheme will return, many first-time buyers are understandably sceptical about mortgage affordability. Salaries have not risen in line with property prices in recent years, meaning even the most generous loans of five times your income won’t be enough to buy a home in many areas of the UK.
However, while no government schemes to directly replace the Help to Buy scheme are on the horizon, there are other options for aspiring homeowners struggling to meet home finance requirements. We look at six of the best current alternative routes onto the property ladder.
1. The Shared Ownership Scheme (UK-wide)
The Shared Ownership scheme can make buying your first home more affordable by allowing you to buy a share in your new home. The housing association you buy from retains ownership of the remaining share until you are able to afford it. This means you’ll need a smaller deposit to cover just the percentage you initially buy, making it easier to save for.
Noteworthy: You’ll need to meet specific criteria to qualify so be sure to visit the informational page linked above.
2. The First Home Scheme (England only)
The First Homes Scheme provides new build properties through certain property builders at a discount of 30% to 50% below their market value. This only applies to properties specifically built within the scheme which limits the numbers and areas in which they are available. Houses must only be resold to other buyers that qualify for the scheme.
Noteworthy: Key workers, those on a low income, and people with local connections to the area tend to be given priority to these homes
3. Rent-to-Buy/Rent-to-Own (England and Wales)
The Rent to Buy scheme is known by different names in different areas of England and depending on the housing association offering it, and as the Rent to Own scheme in Wales. Terms vary between schemes and by housing association but all aim at offering a reduced rent property, allowing tenants to build up a deposit to later purchase their rented home.
Noteworthy: There are specific criteria to meet depending on the country you reside in and the housing association relevant to you, please check details on the respective pages.
4. Rezide Equity Loan
This private sector equity loan was developed to bridge some of the gap left by the government’s help-to-buy scheme by offering a similar equity loan to buyers with 5% deposit. Similarly it is only available on new-build properties and minimum and maximum loan amounts apply. Currently mortgages for the scheme are only available through Barclays and TSB, and with selected property developers.
Noteworthy: The equity loan of 15% of the property value (up to a maximum of £100,000) is fixed at 4% interest and must be repaid in full when you sell your home or at the end of the mortgage term.
5. The deposit unlock scheme
Deposit unlock was introduced by the Home Builders Federation in 2022. It allows buyers to purchase new-build homes from builders who participate in the scheme with a 5% deposit.
Noteworthy: There is no equity loan provided with this scheme. While it allows you to buy with a 5% deposit, you must qualify for a mortgage covering 95% of the property value with a lender who partners with the scheme.
6. Hybrid mortgages
Also known as part and part mortgages, hybrid mortgages are not a homebuyer scheme and have actually been around for some time. Nevertheless, in the current climate, lenders have aimed new products in this range to those unable to save a large deposit, making them more appealing to first-time buyers.
A part and part mortgage allows you to repay both the capital and interest owed on a certain percentage of your mortgage, but just the interest on the remainder. This reduces monthly repayments and can therefore aid in loan affordability.
Noteworthy: While this is potentially a helpful start to repaying your mortgage, keep in mind that an element of the capital won’t be repaid during the term. This means you’ll need to plan carefully to repay the remaining capital at the end of the mortgage term.
Get expert advice about your mortgage options
Help to Buy ISA alternatives?
If you didn’t start paying into a Help-to-Buy ISA before November 2019 you’ll no longer be able to benefit from the scheme. Often popular with prospective homeowners, this scheme gave participants a bonus top up of 25% on their own savings. This could then be used either as a deposit to buy a new home, or for retirement.
The good news is, if you’re between 18-39, the Lifetime ISA is now available. It works similarly to its predecessor and also gives a 25% government top up on your savings. This can also be used towards a home deposit.
Unsure which alternative to choose? Get in touch and we'll arrange for a broker who specialises in Help to Buy mortgage alternatives to provide a complete rundown of your options.