Originally launched in 2013 to help first-time buyers onto the property ladder, the scheme has been a key pillar of the UK mortgage industry.
Although widely publicised, the wind-down of the scheme has left many potential borrowers confused about their options for the future. To support these customers, advisers need clarity from the market on what comes next. For lenders, this is an opportunity to shape the future of our industry and to step-up as leaders.
What comes next
There is not yet a clear successor to Help to Buy, and it seems unlikely that any one solution will fill the gap immediately. In the short-term, many first-time buyers will be looking for options that allow for high LTV lending, while still meeting their affordability requirements.
As a result, many lenders may see a rise in demand for high LTV lending from those who can’t afford a larger deposit. More innovation and options around products like 95% LTV mortgages will be crucial to meeting some of this demand, but it’s also worth investigating alternative models, such as shared ownership. Again, shared ownership is not a silver bullet, or a like-for-like replacement for Help to Buy, but it might be an appropriate solution for some borrowers who previously would have relied on the scheme.
Beyond these options there are a range of more formal schemes that could provide another path for first-time buyers to find their way onto the property ladder. While not on the same scale as Help to Buy, and lacking in the same level of government backing, there is distinct merit to initiatives such as ‘Deposit Unlock’ and ‘Market Mortgage’. In a similar manner to Help to Buy, both schemes support borrowers with small deposits to secure the high LTV products they need to make a first step onto the housing ladder. To be successful, though, any initiative will need the backing and committed public support of the UK’s lenders.
A chance to lead
In the absence of a clear successor to Help to Buy, advisers have found themselves in a somewhat difficult situation. They desperately need clarity on this issue and the earlier they receive it, the better. After all, advisers need time to educate themselves on any new options, as well as transparency from lenders, to reassure and support their customers.
At the moment, it seems like many lenders are preoccupied with wrapping up Help to Buy cases or working with the government’s 95% mortgage scheme, which launched last year. There seems to be less commitment made to the long-term future of the sector, and both initiatives are due to end imminently, in March 2023 and December 2022 respectively.
To be truly successful, future schemes will need buy-in from a broad coalition of lenders, but many lenders are understandably nervous about being the first to jump in. Some may be waiting for bigger players to move, or for more guidance from the Government, but this indecision is creating problems for advisers and their clients.
High levels of Treasury spending since the start of the pandemic, along with a range of other pressures, may mean there is little government appetite for immediate investment in this area on the same scale as Help to Buy. This presents a unique opportunity for the industry to choose its own path and agree on a shared future. However, no lender, no matter how large, will be able to go it alone.
A more collaborative future
Whichever direction the property industry decides to take will require collaboration and collective effort. By being bold and decisive now, we have a unique opportunity to build a more united and sustainable future. It’s an exciting time for the mortgage industry and I have absolute faith that the market will take on this latest challenge with the same hard work, determination, and creative innovation with which it faced the pandemic. And now is the time to show it.
Danny Belton is head of lender relationships at Legal & General Mortgage Club
