When it comes to housing policy, we would all welcome a bit more clarity and consistency. In their absence, rumour and speculation perhaps are inevitable.
But some rumours appear to have more substance than others. The Times reported in early summer that three government sources had confirmed that prime minister Rishi Sunak was prepared to put Help to Buy ‘back on the table’ before next year’s general election, although apparently at that time he was concerned such a move could be inflationary.
With inflation now falling, could Help to Buy or a similar scheme be revived? Or, perhaps more importantly, should it be?
It would be great if the government shared its thinking
Let’s briefly remind ourselves of the details. The Help to Buy Equity Loan scheme was introduced by then-chancellor George Osborne in 2013 to kickstart the housing market following the financial crisis.
The most recent version ran from December 2020 to March 2023 and offered first-time buyers a loan of between 5% and 20% of the purchase price of a newly built home, or up to 40% in London.
The buyers themselves had to put down a 5% deposit, with the scheme giving them access to lower loan-to-value mortgage rates. The equity loan was interest free for five years.
A revised scheme, possibly more sharply focused on struggling first-time buyers, could be rolled out relatively quickly
The maximum value of the new homes that could be bought using Help to Buy varied regionally, from £186,100 in the Northeast to £600,000 in London.
Fans and detractors
Help to Buy had its fans, and its detractors. Critics believed the scheme served to inflate the housing market in general, and the cost of new-build properties in particular, by creating an artificial increase in homebuyer demand.
Some believed the price caps were too generous in some areas, allowing first-time buyers who could have afforded to get on the ladder without support to take advantage and buy larger, more expensive homes. Others accused the scheme of using taxpayers’ money to line the pockets of homebuilders’ shareholders.
Certain lenders have noted that both they and mortgage advisers had become familiar with Help to Buy
But Help to Buy undeniably had the desired effect of kickstarting the housing market in 2013 and generating activity in many ancillary industries, from building to mortgage lending and advice to retail furnishing and DIY.
Over the following decade, more than 380,000 people used the Help to Buy scheme to get on the property ladder. Some may have used the scheme to buy a three-bed house rather than a cheaper ‘starter’ flat but, given that many first-time buyers were thirtysomethings with children, perhaps that is understandable.
Cost of living
In the current market, with the cost-of-living crisis making it harder than ever for first-time buyers to save a deposit, plus a dearth of property to let, record rents squeezing tenants and higher interest rates curbing mortgage affordability, the argument for reviving some sort of scheme to support aspiring homeowners may have legs.
Some believed the price caps were too generous in some areas
In fact, there are plenty of interested parties looking to enable homebuyers in a range of ways. For example, the Deposit Unlock scheme — which was developed by the Home Builders Federation in collaboration with a number of lenders — allows buyers to access new-build properties from participating developers with a 5% deposit, with the developer paying a type of mortgage insurance guarantee premium.
Ahauz, Even and Proportunity all offer varying types of equity loan to buyers matching different criteria.
Such schemes are supported by some lenders but have so far not achieved the volume of loans made under Help to Buy.
While acknowledging its flaws, certain lenders have noted that both they and mortgage advisers had become familiar with Help to Buy, which also benefited from the reassurance of being backed by the government.
Help to Buy undeniably had the desired effect of kickstarting the housing market in 2013 and generating activity in many ancillary industries
Some changes may be desirable, but a revised scheme, possibly more sharply focused on struggling first-time buyers, could be rolled out relatively quickly.
If the government is indeed minded to look again at Help to Buy, it would be great if it shared its thinking with us.
Kate Davies is managing director of the Intermediary Mortgage Lenders Association
This article featured in the October 2023 edition of MS.
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