Help to buy is only helping to push up the price of our flat

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I reserved a plot at Nu Living’s 360 Barking development in London 10 months ago. It cost £400,000 for a 71 sq metre flat which is expensive for the area and I used the government’s help to buy scheme to fund it. I also used Nu’s recommended mortgage broker and solicitor.

However, my mortgage lender valued the property at only £330,000. Under help-to-buy rules, the developer can’t charge more than the bank valuation.

Nu rejected this and asked me to get a valuation from another lender, which cost me an extra £400. This also valued it at £330,000. Nu took two months to reject this and insist I pay for yet another valuation.

I have spent around £2,000 with nothing to show for it.

RC, London

Help to buy grants loans of up to 20% (40% in London) of the property’s value interest-free for five years. It was designed to help buyers on to the property ladder, but the unintended result has been to subsidise a housing bubble and inflate prices. One in seven homes bought under the scheme loses value despite booming local property markets, an investigation by consumer organisation Which? found last year.

When I challenged Nu about its rejection of two independent valuations, it told me obliquely that it has “never exchanged nor completed on properties using help-to-buy funding higher than the mortgage valuation”. Of course it hasn’t. The scheme won’t allow it.

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What it evidently has done is required you to shop around for a valuation that reflects its asking price, so it can exchange and complete in accordance with the rules. It said it was “revisiting” your case “in light of our conversations with the firm that undertook these valuations and in light of the wider market position”.

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The result? A third survey, paid for by the lender, valuing the flat at £375,000. Nu agreed to honour this. However, you could be left in negative equity if you pay more than a property is worth. “If the developer won’t negotiate, you should walk away,” said Paula Higgins, chief executive of HomeOwners Alliance.

“Developers must adhere to the consumer code for housebuilders which states buyers have the right to cancel and get their deposit, minus reasonable administration charges.”

Next time it’s worth investigating homebuyers’ protection insurance, which covers survey fees if the valuation is less than the asking price.

The Ministry for Housing, Communities and Local Government told me that it was “completely unacceptable” for developers to charge a premium for help-to-buy homes and that buyers should report suspected price inflation to the government housing body, Homes England.

From April there will be regional caps on the maximum amount properties can be sold for under a revised help-to-buy scheme. This has been fixed at one and a half times the average first-time-buyer new-build property price (as at autumn 2018).

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