The UK government’s Help to Buy (HTB) scheme is ending after nine years and there is currently no planned replacement.
Between 1 April 2013 and 31 March this year, 361,075 properties were bought with an equity loan, according to Interactive Investor, representing a total value of £22.5bn.
Without the HTB scheme or a similar replacement, we will see sales of new houses drop significantly and FTBs will ultimately suffer.
Interactive Investor senior personal finance analyst Myron Jobson says the ending of the scheme “could not have come at a worse time for first-time buyers [FTBs], with rising mortgage rates, inflated house prices and the cost-of-living crunch pricing many would-be homeowners out of the property market”.
He adds: “We may see a replacement scheme take its place in the coming months to ease the plight of FTBs.
“The government is busying itself on devising a formula to stimulate economic growth ahead of the Autumn Budget — and a robust housing market is a key ingredient to this end.”
Oportfolio Mortgages content and communications manager Louis Mason says a replacement scheme has been “heavily hinted at”. HTB has been “hugely beneficial to the new-build market and homebuyers in general, so much so that it was extended several times despite initially being slated to end after five years”, he explains.
Legal & General Mortgage Club head of lender relationships Danny Belton says there are also rumours that “major industry players met with the former chancellor to discuss a potential replacement. However, this hasn’t gained much traction in light of recent political events”.
While the Budget may shed further light on the new government’s plans, Belton says “this remains to be seen”.
Many people will be looking to brokers for alternative solutions and, while these may not yet fill the void HTB leaves, they could go some way to helping some buyers step onto the ladder.
LSL New Homes Financial Services director Craig Hall would like to see HTB further extended “as the current economic backdrop renders this more necessary than ever”.
But he thinks the scheme may need further refinement, “especially around means testing and regional price caps, which should be reviewed in light of house-price inflation across the country”.
Nevertheless, Hall says other purchase schemes are available, such as the recently launched First Homes scheme.
Similarly, he says private homeownership schemes will likely prove popular. This includes the Deposit Unlock scheme launched last year in conjunction with 17 major housebuilders and the Home Builders Federation.
Shared ownership is another option for accessing the property ladder. Mortgage Advice Bureau business principal Kate Fuller says: “You will need a smaller deposit to get a mortgage as you will only be buying a share of the property.
“It is also a good way of buying in places where you might not be able to afford the full property.”
However, Fuller notes that buyers must factor in the “additional costs you will incur if opting for a shared ownership mortgage. As well as monthly mortgage and rental payments, you will have all normal purchasing fees as well”.
Although shared ownership is becoming popular, Mason says not all lenders offer mortgages for it, “meaning products are limited and rates can be high”.
Property prices are still very high, and it is becoming increasingly difficult for people to save deposits, especially with the cost of living rising
The end of HTB will also have an impact on new-build companies. The Mortgage Quarter director and mortgage adviser James Miles suggests such firms will be “sweating about demand falling in their properties”.
He adds: “We’ve seen the values artificially inflated so I would expect the price of new-builds to come down. With many lenders also wanting a higher deposit for new-build properties, the competition on rates will also reduce, which cannot be good for buyers.”
Mason describes the loss of HTB as “detrimental” to the new-build market.
He says: “Property prices are still very high, and it is becoming increasingly difficult for people to save deposits, especially with the cost of living rising.
“The HTB scheme allowed people to put down as little as a 5% deposit on a new property. Currently there are very few lenders that will offer 5% deposit mortgages.
“Without the HTB scheme or a similar replacement, we will see sales of new houses drop significantly and FTBs will ultimately suffer.”
However, Accord Mortgages is one lender that will continue to support new-build FTBs.
Director of intermediaries Jeremy Duncombe says: “FTBs are the lifeblood of the housing market. We’ll continue to support new-build FTBs up to 95% through the Deposit Unlock scheme, and by serving the general 90% and 95% LTV markets with products often designed exclusively for FTBs.
“We’ll also continue to explore new solutions to help people buy homes, such as the introduction of our Cascade Score range that offers alternative mortgages up to 90% LTV for customers who don’t meet our higher scorecard.”
Brokers can also play a part in supporting customers after the end of HTB. While “no silver bullet” exists to replace the scheme, Hall believes independent advice “will be crucial”.
“Many people will be looking to brokers for alternative solutions and, while these may not yet fill the void HTB leaves, they could go some way to helping some buyers step onto the ladder.
“New-build mortgage advice is set to become even more specialist as a result of a range of solutions, and therefore the value of independent advice will increase.”
Fuller adds: “A mortgage adviser will help people navigate the market to find the most suitable deal for their circumstances. They can weigh up the price of any fees and charges involved, cut through the jargon, consider what deals they will most likely be accepted for, compile the necessary paperwork, as well as liaise with lenders on their behalf to help speed up the process.”
