What to expect in the wake of Help to Buy

The government Help to Buy equity loan scheme is set to change next year, bringing exclusivity to first time buyers and the introduction of regional price caps – it’s then set to end completely in 2023. Our Managing Director, Sally Laker, takes a look at what could come next for the industry that has had government backed equity schemes in place for over 15 years.

The Help to Buy equity loan scheme was introduced in 2013 and since its inception has grown from accounting for 10.4% of total new build sales to just over half in 2019, according to the Ministry of Housing Communities and Local Government, HM Land Registry.

Since the start of the scheme UK house building has also increased. The number of new build starts has risen from 120,000 at the start of the scheme to around 175,000 with the scheme supporting homeownership for nearly a quarter of a million transactions, according to the latest data from the Ministry of Housing Communities and Local Government.

There’s no denying the positive impact the Help to Buy equity loan scheme has had on buyers in the UK, but when it closes in 2023 it’s set to leave a £23 billion shortfall.

So, what can we expect to see in the wake of the Help to Buy scheme?

First Homes Scheme

There is already talk of a potential new government backed scheme, the ‘First Homes Scheme’. The government announced a plan that will see some new home prices cut by a third for first-time buyers if they’re planning on getting their first step onto the property ladder in their local area.

The government have proposed a clause that would allow lenders to waive restrictions on the property, including the policy requirement to sell the home at a discount in the event of a repossession to improve lender competition in the market.

More Shared Ownership

The end of Help to Buy could bring with it an increase in shared ownership, an already fairly well-established choice. There are a range of lenders in this market with our Mortgage Network having 19 on panel and our Mortgage Club having 18 on panel.

Shared Ownership increases the population of home-buyers that could not otherwise afford to purchase a property. By owning a smaller share in the property, they won’t be required to put down such a large deposit, helping overcome one of the largest barriers to homeownership for first-time buyers.

An increase in market share for the Bank of Mum and Dad

There are a whole host of options available for family members who want to help their loved ones get their first step onto the property ladder, which I believe will only increase with the end of the Help to Buy scheme.

There are options like Joint Borrower, Sole Proprietor, whereby a family member can add their name to the mortgage to increase affordability, or other options like The Post Office Family Link and Barclays Springboard which allow family members to help with raising a deposit.

With the closing of the Help to Buy scheme we’re likely to see a rise in innovation from lenders looking to compete for first-time buyer business – and our Broker Support Team will constantly be on top of any changes and we will keep you up to date with the relevant training and information.

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