First-Time Buyer: Buy vs Rent vs Save After Help to Buy

01 Help to Buy has closed — what changed

The Help to Buy equity loan let first-time buyers borrow up to 20% (40% in London) of a new-build's price interest-free for five years, on top of a 5% deposit. It closed to new applications in October 2022 and the scheme ended in 2023, so it's history for anyone buying now. Its reputation was mixed: it boosted deposits but was criticised for inflating new-build prices and leaving some buyers with rising loan repayments and homes worth less than hoped. Whatever its merits, the practical point today is simple — don't plan around it. The support that remains is genuinely useful, and you build your strategy on that.

What that removed was a specific and unusual subsidy: the ability to control a property with a 5% deposit while borrowing only 75% commercially, which both reduced the mortgage needed and secured a better rate on it. Nothing that replaced it does the same job.

Existing borrowers are still in it, and the terms matter now more than they did at purchase. Interest begins after five years at 1.75% of the loan, rising annually, and the loan is repaid as a percentage of the property's value rather than the amount borrowed — so a 20% equity loan on a house that has risen from £250,000 to £320,000 is repayable at £64,000, not £50,000.

That structure means the equity loan becomes more expensive precisely when the purchase went well, and repaying or staircasing out of it is a decision worth taking deliberately rather than defaulting into interest that rises every year.

For anyone buying now, the practical question is what to use instead — which is the rest of this post.

Source: GOV.UK — Affordable home ownership schemes

02 The current first-time buyer toolkit

What replaced Help to Buy is a set of smaller, narrower measures rather than a single scheme, and they work best combined.

The Lifetime ISA is the closest thing to a direct replacement for a first-time buyer: a 25% government bonus on up to £4,000 a year, usable on a first home worth £450,000 or less, provided the account has been open at least twelve months. It is the most valuable of the current options for anyone under 40 buying below that cap.

Mortgage guarantee schemes support 95% loan-to-value lending, which addresses the deposit barrier from a different direction — the buyer still borrows the full amount commercially, so the monthly cost is higher than under an equity loan.

First-time buyer Stamp Duty relief reduces or removes the tax on purchases up to a threshold, which is worth several thousand pounds on a typical purchase and requires no application beyond claiming it on the return.

Shared ownership remains available, letting a buyer purchase a share and pay rent on the rest, with the option to staircase up over time. It has real costs — rent on the unowned share, service charges, and restrictions on selling — that make it a different proposition from either buying or renting outright.

None of these lets a 5% deposit control a whole property interest-free, which is what Help to Buy did. The replacement toolkit is more modest and better targeted, and it rewards starting earlier.

Three tools do most of the work now. The Lifetime ISA is the standout: open one between 18 and 39, save up to £4,000 a year, and the government adds a 25% bonus — up to £1,000 annually — that you can put towards a first home worth up to £450,000. First-time buyer stamp duty relief means no SDLT on the first £300,000 and 5% on the slice up to £500,000 (no relief above that), under the rates from April 2025. And shared ownership lets you buy a share of a home, typically 25–75%, and pay rent on the rest, lowering the deposit and mortgage you need. Each can stack with the others — a LISA-funded deposit on a shared-ownership flat with stamp duty relief is entirely possible.

Source: GOV.UK — Lifetime ISA

03 The Lifetime ISA deposit boost

The three options are not really alternatives, because they answer different questions. Buying asks whether you can afford the deposit and the payments; renting asks what you do meanwhile; saving asks how long meanwhile lasts.

Saving is not a third destination so much as the bridge between the other two, and its length is the actual decision. A larger deposit lowers the loan-to-value, which lowers the rate, which lowers the payment for the whole term — so waiting is not purely a delay; it changes the terms of the eventual purchase.

The honest test is a time horizon. Confident of staying five years or more in the same place, buying usually wins on cost. Less than three, renting usually does. Between those, it turns on the local rent-to-price ratio and on how much the extra saving would improve the mortgage rate.

Shows: the deposit your Lifetime ISA builds and the government bonus within it (25% on up to £4,000/yr, so up to £1,000/yr). Ignores: the £450,000 property cap, the 25% exit charge for non-qualifying withdrawals, and the £4,000 annual contribution limit beyond the bonus cap — an illustration of the bonus, not full LISA rules.

A quarter of the pot is free money — capped at £1,000 a year. → See full app

The Lifetime ISA's 25% bonus is the closest thing to free money in the first-home toolkit. The tool below shows what your monthly saving grows into, and how much of the final pot is the government bonus, capped at £1,000 a year. The bonus is paid on your contributions and then grows alongside them, so starting early matters.

Source: GOV.UK — Lifetime ISA (bonus and limits)

04 Buy vs rent vs shared ownership

Beyond the deposit tools sits the real decision: which path onto the ladder, or whether to step on at all yet. Each route trades off the deposit you need, the monthly cost, who captures price growth, and how flexible you stay.

There's no universal winner. Buying ends rent and captures growth on the whole home, but ties up a deposit and punishes a short stay. Shared ownership lowers the entry barrier but adds rent and leasehold complexity. Renting and investing keeps you flexible and can win where price growth is weak — which is the case worth taking seriously, not dismissing.

05 When renting and investing wins

"Renting is dead money" is the line that pushes people to buy before they should. It isn't always true. If you'd move within a few years, the transaction costs of buying — stamp duty, legal fees, survey, and selling costs at the other end — can easily swamp the rent you'd "save," because they're paid whether or not the house gains value. And if you rent somewhere cheaper than a mortgage would cost and invest the difference in a Stocks and Shares ISA, that invested gap compounds tax-free and can outpace a flat or falling local property market. Buying is usually the right long-run move for a stable household — but "usually" and "for a short, uncertain stay" are different sentences, and the numbers, not the slogan, decide which you're in.

06 A first-home plan that holds up

A solid first-home plan does four things. Use the LISA if a first home is realistically within the £450,000 cap and a few years out — the 25% bonus is too good to skip. Keep emergency savings separate, in an instant-access account, so a job loss doesn't force a penalised LISA withdrawal. Run the buy-vs-rent numbers honestly, including all the transaction costs and how long you'll really stay, rather than reaching for "renting is dead money." And don't over-stretch the mortgage just because a scheme made the deposit possible — the monthly payment, not the deposit, is what you live with for decades. Do those and you reach the ladder on a footing that lasts, scheme or no scheme.

07 The current toolkit, compared

Four measures replaced one scheme. They do different jobs and stack rather than compete.

The Lifetime ISA is the only one that adds money rather than adjusting a cost, which is why it is worth opening early even with a token amount — the twelve-month clock is the constraint people hit.

Source: GOV.UK — Owning a home