Intermediaries must remain up to date on govt changes | Mortgage Introducer

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With changes to both Help to Buy and Shared Ownership due to come into force at the beginning of April 2021, it’s vital that intermediaries and their clients remain fully up to speed on how they will be affected by these impending changes.

The new Help to Buy scheme, running until 2023, will be restricted to first-time buyers and will operate with regional price caps in place.

Meanwhile, the new Shared Ownership scheme will allow buyers to purchase a minimum share of 10% compared to 25% previously, and will permit staircasing in instalments of 1%, rather than 5% or 10% currently.

In addition, a new 10-year period will be introduced for maintenance and repairs, whereby the landlord or housing association will be required to cover costs rather than homeowners.

Why is Help to Buy so important?

Whilst far from perfect, it’s a scheme which has enabled a huge number of people to purchase a home.

It has mainly appealed to first-time buyers, but it has also helped some people take a step up the property ladder and vacate the types of properties which prove attractive to first-time buyers. To get some idea of its impact, let’s take a look at the numbers.

The latest figures from the Ministry of Housing, Communities & Local Government outlined that a total of 291,903 properties were bought between 1 April 2013 and 30 September 2020 using the Help to Buy equity scheme.

The data also showed that 82% of all completions were by first-time buyers. The total value of the equity loans was £17.4bn and the value of the properties sold under the scheme equated to £79.2bn.

In addition, between 1 July and 30 September 2020, 13,211 properties were bought with an equity loan.

When focusing on first-time buyers, additional data collected by reallymoving showed that 17.2% of first-time buyers used either a Help to Buy equity loan or Shared Ownership to get onto the housing ladder in 2020.

This is said to be up from 15.4% in 2019 and 13.1% in 2018. Shared Ownership was the most popular option, accounting for 10.1% of all first-time buyer transactions last year, compared to 7.1% opting for a Help to Buy loan.

As a result of rising house prices, the average first-time buyer is now required to raise an additional £10,800 for a deposit, increasing the average amount paid to £57,279.

The ongoing challenges

As we have seen from the sheer volume of transactions over the past six months or so, there remains a huge appetite for homeownership, especially amongst first-time buyers.

However, the raising of a significant deposit remains an issue for many. Thankfully, some positive news has emerged in the higher LTV lending bands.

The number of products available at 90% LTV was reported to have risen by 29 in the first two weeks of February alone, following 88 additional products coming onto the market between the start of January and February.

According to data from Moneyfacts, this takes the total number of 90% LTV products to a current figure of 277.

While not yet close to the 776 deals available at the start of February 2020, this is considerably above the low of 44 deals offered in early September 2020.

The number of lenders who offer 90% LTV mortgages overall is also said to have risen – by five since the start of this month, and by 15 since the beginning of January. All signs that the market is moving in the right direction.

What next?

The question of whether there will be a direct, or different form of initiative to replace Help to Buy is a tough one to answer.

It is a scheme which created a well-trodden path for purchasers, housebuilders, lenders and intermediaries over the years.

And it’s up to lenders, backed by government support, to generate a range of innovative yet responsible solutions to service the ever-changing needs of borrowers across all LTV bands, especially for those low deposit borrowers.