Help to Buy has been a central pillar of the new build market for seven years, but next year the scheme is facing its most significant change since launching in 2013.

From April 2021, Help to Buy will be restricted to first-time buyers only and a series of regional price caps will be implemented across England. As the current phase of the scheme draws to a close, both developers and buyers face two longstop dates, set out by Homes England earlier this year.

Initially, these consisted of a physical completion date for developers of 31 December 2020 and legal completion for buyers of 31 March 2021. With such a significant change taking place on Help to Buy and these deadlines to meet, Covid-19 could scarcely have hit at a more inopportune moment.

Modification not extension

Help to Buy has long been popular amongst housebuilders and many will have factored the current scheme into their business plans at the outset of any new developments. But the nationwide lockdown that led to the closure of the UK housing market in March this year has clearly caused significant delays for developers. Whole sites were effectively put on ice for nearly two months and it quickly became evident earlier this year that an extension of the current scheme’s deadlines was desperately needed.

Recent figures from the Home Builders Federation suggested that around 18,400 sales via Help to Buy were at risk from construction delays. Of those, an estimated 7,700 transactions totalling £2.4bn will not be eligible for the new phase of the scheme.

In July, the government responded to the calls for an extension to the scheme by adding two months to the permitted timescale for housebuilders, who now have until 28 February 2021 to physically complete properties.

This modest extension provides a degree of breathing space to developers as they get construction plans back on track following the lockdown. It does not, however, extend to consumers – who must still legally complete their purchase by 31 March 2021. If they miss that date, these borrowers will only be able to apply under the new scheme if they are FTBs – so if they are not, they risk losing the property they want to buy.

The new deadlines are also likely to leave some buyers with very little time to get their mortgage applications underway, exchange and finally complete before the scheme closes, particularly if they have not yet started the process.

The mortgage market is currently experiencing unprecedented levels of demand. Advisers will be aware of the impact this is having on service levels across the industry, not just for lenders but for other stakeholders, including conveyancers, who are battling to keep up with demand. That demand is likely to accelerate yet further as other buyers rush to take advantage of the Stamp Duty holiday before it too closes on 31 March 2021.

This will create pressure on all stages of the mortgage process for all customers – not just those trying to secure a Help to Buy loan. Those who have not yet begun may find they have left it too late.

Added to all this is the prospect of a second wave of coronavirus now threatens to be a very real possibility. With now just six months to go until the current phase of Help to Buy ends, a further national lockdown in the winter months would put even more strain on buyers and developers looking to use the scheme.

If the construction sector is put on hold once again, there may be further calls for another extension – or at least for a flexible approach to the deadlines for pipeline cases which could otherwise have had a reasonable expectation of completing in time. It would seem arbitrary and very harsh to operate a guillotine on cases which miss the deadlines through no fault of the parties concerned.

What comes next

Government has been clear that Help to Buy will come to a complete stop in 2023, meaning something must be done to fill the gap that the scheme will leave when it ends, particularly for FTBs. With the government’s primary focus now set on sparking economic activity, an effective replacement for Help to Buy could play a vital role in turbocharging activity, not only in the new build market but also more widely, by opening up the higher LTV market again.

Help to Buy became crucial following the 2008 credit crisis because it allowed borrowers to buy when they were unable to raise significant deposits. Enabling borrowers to buy with 5 per cent deposits would help to open up the mortgage market beyond just new-build – which has got to be a healthy development.

Ima is aware that there are now well-developed plans to launch schemes which could do just that – and we shall watch with interest and anticipation as they come to market. They may be very effective in facilitating lending and getting more borrowers onto and up the ladder.

Ultimately, however, we need a long-term strategic plan to get not only more homes built, but the right types of homes, so that we create a diverse property market that really meets people’s needs at all stages of their lives. That will take more than collaboration on funding between developers and lenders – it will require real leadership and vision from the top of government and permeating through many departments and disciplines. It’s a big task.

Kate Davies, executive director, Intermediary Mortgage Lenders Association