SQUEEZED working families have suffered a “double whammy” to their hopes of climbing the housing ladder after the popular Help to Buy scheme’s availability was dramatically cut back today.
Property experts have warned that “aspirational” Scots with young children will be among those hit by the Scottish Government’s decision to end the mortgage help scheme for properties between £250,000 and £400,000.
It follows the decision last week to increase the cost of buying a home worth more than £325,000, when the SNP administration unveiled the rates to be applied under the new Land and Building Transactions Tax (LBTT), which will replace stamp duty.
Help to Buy was launched just over a year ago. More than 3,000 homes have been bought and 1,500 deals are expected to be completed by the end of this financial year. However, the funding for 2014-15 ran out after just four months, and the £100 million allocated for 2015-16 is not expected to last the full year.
Housing minister Margaret Burgess today defended the reduction of the maximum house price from £400,000 to £250,000.
She said: “By targeting the scheme at properties at or below a value of £250,000, it will support first-time buyers and people who otherwise wouldn’t be able to afford to buy a new-build home. The changes will also see the benefits of Help to Buy extended for as long as possible.”
The LBTT proposals will see cheaper costs for homes under £325,000 – about 90 per cent of buyers – but homes costing more than that will incur higher charges than at present.
Experts also said the Help to Buy changes unveiled today will not hit the wealthy, but instead affect many working families in property hotspots.
Shonagh Morgan, of Savills residential development sales, said: “This will be disappointing news for those hoping to buy above the £250,000 threshold who will no longer qualify for Help to Buy.
“The scheme has proved essential for next-step buyers, particularly for new homes in places like Edinburgh, Glasgow and Aberdeen where affordability is a real issue. These are typically young families, who have outgrown their current home, rather than the super-rich.”
LBTT is likely to mean an additional £2,500 cost for buyers in Edinburgh, where an average detached family house costs around £360,000.
Aberdeen-based Rodney Whyte, a partner in legal firm Pinsent Masons and a specialist in the housebuilding sector, said: “In the short term, this does represent a dramatic shifting of goalposts for aspiring purchasers who were lining up to participate in Help to Buy and creates an added burden.
“We know from last week that the tipping point under the new LBTT is £325,000, where purchasers of properties above that value will be worse off than they would have been under the old stamp duty land tax.
“It is in reality a double hit for buyers in the £325,000 to £400,000 price range. Not only do they now need to find up to an extra 20 per cent of the purchase price which the government would have chipped in under Help to Buy, but they will also pay more property tax on the purchase.”
Scottish Conservative finance spokesman Gavin Brown said Scots will be “suspicious” about the SNP’s “motives and intentions” after last week’s LBTT announcement.
“That was an assault on aspiration – a hindrance to buy rather than a help to buy,” he said.
The high demand for Help to Buy has resulted in ministers allocating £275m to the scheme to date – £55m more than the industry’s original request.
The Scottish Government takes a stake of between 10 per cent and 20 per cent of the value of the home. The scheme is only available to those who are unable to afford a home without the government taking a share.