The Times - UK (2020-08-01)

the times | Saturday August 1 2020 1GM 63

Money

A helping hand

6 The Help to Buy

equity loan scheme

began in March 2013,

promising to help a new

generation to get on or

move up the property

ladder with only a

5 per cent deposit.

6 272,852 homes have

been bought using the

government loans of up

to 20 per cent of a

property’s value (40 per

cent in London). The

loans are interest-free

for five years. Some

82 per cent of people

using the scheme are

first-time buyers.

6 It was due to end on

March 31 and be

replaced by a new

version limited to first-

time buyers. It would

also have regional caps

on the value of homes

that would qualify. The

existing scheme has a

property price cap of

£600,000.

and has exerted pressure on companies

to act, so far on a voluntary basis.

The move follows a complaint made

by Citizens Advice to the Competition

and Markets Authority after discover-

ing those who do not regularly switch

services such as insurance, broadband,

mortgage and savings deals pay a

£4-billion-a-year loyalty penalty. The

authority told the regulators for these

services to sort out the problem.

Ofcom said that it had secured com-

through the scheme at the moment

would not be eligible once the rules

change. It says that about 18,400 house

sales could have fallen through because

construction delays would have meant

missing the previous deadline.

Elliot Kitchingman Smith, 29, and his

partner, Robert, 30, both first-time buy-

ers, managed to find a builder that was

committed to meeting the previous

December cut-off date and reserved a

plot for a new-build home in Bradford.

The house is valued at about

£245,000 so they would not be eligible

under the new scheme because the cap

for Yorkshire would be £228,100. The

couple have a deposit of about £18,000,

so would struggle to get a mortgage

without the government’s loan.

“Our builders said it would be ready

in time so that does ease the worry,

although an extension to the scheme

has given us some extra leeway.”

Developers tend to charge a prem-

ium for new-build properties, and the

Help to Buy scheme has been criticised

for inflating prices. There are also

seeking help to buy their home

concerns that while housebuilders’

profits have been significantly boost-

ed by the scheme, there has been a

lack of quality control and some

buildings are not up to scratch.

Charlotte Gordon, 32, an NHS

worker, and her husband Shay, 34,

an engineering manager, reserved a

four-bed semi-detached house with

the developer Persimmon in

June and were given an esti-

mated completion date of

November. The couple,

who have a two-year-

old daughter, are ap-

plying for a mort-

gage and have been

advised by their solici-

tor to insert a clause into

their contract so that they

could get their £13,500 deposit

back if the Help to Buy loan can-

not be used.

The new-build in Rothwell is

valued at almost £270,000, exceed-

ing the proposed cap of £261,900

for Northamptonshire.

“Now the extension has been

agreed, it means that we can relax,

and plan for our first home as a

family. We have kept our fingers

crossed, but we are just so pleased

that the government is finally doing

something about it,” Charlotte said.

Many first-time buyers with small

deposits could struggle to get mort-

gages without Help to Buy because

most lenders have withdrawn loans

for people with less than a 15 per cent

deposit to put down.

Steve Turner from the HBF said:

“With mortgages for first-time buy-

ers now few and far between, Help to

Buy is more important than ever.”

From the scheme’s launch in April

2013 to the end of March this year,

272,852 properties were bought with an

equity loan, 82 per cent by first-time

buyers, according to the Ministry of

Housing, Communities and Local Gov-

ernment. The average purchase price

was £268,553 with buyers using an equi-

ty loan of £58,820.

The Ministry of Housing, Communi-

ties and Local Government said it:

“continues to work closely with the

housing industry to understand the

challenges and opportunities it faces”.

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18,400

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without an extension to the scheme

Bradford

Elliot and Robert

say the pressure is

on to finish their

home in time

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Sunderland

Robert and Caoimhe

could not afford their

home without

the loan

Virgin Media sends loyal customers the wrong signal

V

irgin Media is refusing to offer
loyal broadband customers the
same deals as switchers despite
pressure from Ofcom.
The company, which claims to offer
some of the fastest broadband speeds
in Britain, is one of the few remaining
large providers that reserve their
cheapest deals for new customers.
Longstanding Virgin Media users pay
about £52 a year more than people on
new contracts.
EE, Plusnet, BT, Sky and TalkTalk
allow existing customers access to all
new deals, the regulator said. With
Virgin, you may need to switch to
another company and then switch back
to get the cheapest offers.
The company said that it was wrong
to focus on price alone and insisted that
it was “always clear and transparent”
about the length and cost of plans.
“Customers can speak to us at any time

to discuss their package”, it said.

Four out of ten broadband customers

— about 8.7 million households — are

paying more for their broadband than

they need, earning their suppliers an

extra £500 million a year, the telecoms

regulator said in a report this week.

Customers of EE who are out of con-

tract are the worst affected, paying

about £7.90 a month more than cus-

tomers who agree to a new deal with

the company. TalkTalk charges about

£6.90 a month more.

The average out-of-contract deal

across the sector is £4.70 a month more

expensive.

The data highlights a so-called loyal-

ty penalty that has a disproportionate

impact on the elderly and vulnerable,

who are less likely to haggle for a cheap-

er deal or to switch regularly.

Ofcom is under pressure to ensure

that these customers are better served

mitments from BT, TalkTalk and Vir-

gin Media, EE, Plusnet and Sky to re-

duce prices automatically for vulnera-

ble customers who are out of contract.

This will save a million customers about

£270 million a year, the regulator said.

Under rules introduced in February

customers must be warned when their

contract is ending and told what they

could save by signing up to a new deal.

If you have not switched broadband

companies for more than a year, you

are probably paying more than you

need to. You can usually get a better

deal with your provider, but you will

probably have to ask and then sign up to

another 12-18 month contract. Use a

comparison site such as Uswitch or Go

Compare to see if a rival can offer a bet-

ter deal. You may be able to use that to

negotiate a better rate with your exist-

ing company.

Ali Hussain

Loyalty penalty

EE TalkTalk Plusnet Sky Virgin Media BT

£7.90

£6.90

£5.10

£4.30 £4.30 £4.10

How much more out-of-contract customers pay each month

Source: Ofcom