UK Finance has called for a new Help to Buy scheme and higher property purchase limits on Lifetime ISAs in its submission to the Chancellor ahead of the Spring Budget
The banking trade body says that homeownership rates are “declining”, while affordability remains a barrier for many young prospective buyers.
It says: “In 2022, house prices paid by first-time buyers were 16 times higher than in 1982, while earnings had only increased seven times as much.”
UK mortgage approvals are set to fall by around 24% in 2023 compared to the year before, estate agent comparison site GetAgent said in December, after studying monthly mortgage approvals over the past five years.
UK Finance calls for the reintroduction of a scheme such as Help to Buy for FTBs, “but in a more targeted way to account for regional variations in property value”.
This government programme helped mainly FTBs buy 387,195 new-build homes with £24.7bn of equity loans, in the decade that it ran until last year, according to official data released in November.
However, critics say this long-running scheme benefitted housebuilders and served to create a housing bubble by inflating prices for new homes.
The banking trade body also argues that improvements need to be made to Lifetime ISAs to “reflect changes in house prices and the economic realities faced by first-time buyers”.
It says the £450,000 limit on property purchases under the scheme “should be increased in line with the annual house price index.”
The average UK house price is £264,400, according to Zoopla’s January House Price Index. However, in cities such as London and Cambridge, this figure jumps to £536,800 and £470,100, respectively.
UK Finance adds that for “shared ownership purchases using a Lifetime ISA, the cap should be aligned with the value/proportion of the property being purchased, as opposed to the total value of the property”.
The body points out that the current £425,000 FTB stamp duty threshold should be made permanent in the Chancellor’s 6 March statement, adding that it should be “reviewed annually in line with the house price index to enhance fairness across the housing market”.
In former Chancellor Kwasi Kwarteng’s tumultuous mini-Budget in September 2022, stamp duty for FTBs was lifted to £425,000, from £300,00 on a permanent basis.
But in current Chancellor’s Jeremy Hunt Autumn Statement two months later, this uplift will be scrapped at the end of March 2025, with the move forming part of his bid to stabilise the UK economy at the time.
But UK Finance now says: “Affordability is a key factor for any prospective homeowner or mover, as are the associated costs with buying and moving, including solicitors’ fees, property surveys and stamp duty — which can be one of the largest costs when buying a new home.”
The association also calls for the accelerated rollout of the government-backed First Homes scheme launched in June 2021, which sees new-build houses sold at 30% below local market prices to FTBs and key workers in a local area.
It also wants a review of shared ownership homebuying, “to ensure this long-established tenure continues to grow in popularity, remains fit for purpose and fulfils its potential to enable more homeowners onto the property market”.
