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With the Bank of England’s rate rise to five per cent, soaring rents, and the cost-of-living crisis, now is the time for the government to resurrect Help to Buy.
Many would-be first time buyers are having to put their dreams of home ownership on hold, creating further pressure on the rental market, where it is not uncommon for over 20 applicants per available property. Here at Dutton Gregory Solicitors we’re calling for the reintroduction of the government’s Help to Buy initiative to stimulate the first rung of the market.
Housebuilders could also offer their own private alternatives, such as Proportunity, Fairview Homes’ Save to Buy scheme, and similar initiatives by St. Modwen Homes and Kettel Homes. Prior to the introduction of Help to Buy in 2013, Barratt and Bovis Homes also had their own versions, to help first time buyers with low deposits to purchase a new home.
Outweighs supply
The Help to Buy scheme was extremely beneficial to first time buyers, housebuilders, and the overall health of the property market. As it was self-funding, it should never have been scrapped. With interest rates now at their highest level for 15 years, it should be reintroduced as soon as possible.
First time buyers are finding it much harder now, so there is a danger of a generation of young people being denied accessible home buying opportunities. Meanwhile, the demand for rental properties far outweighs supply. Prior to a decade of Help to Buy, there was Home Buy Direct and First Buy, so how is it right that there is no longer a government initiative to make home ownership a possibility for those without a substantial deposit?
The government’s First Homes initiative enables first time buyers that meet Local Authority criteria to secure a home for 30% - 50% less than its market value, but there are so few of these homes available. As there is currently no sign of widespread first time buyer assistance on the horizon, the only way forward is for more housebuilders to introduce their own private schemes in order to convert those in the rental trap to new homeowners.
On the horizon
With a General Election on the horizon, I do believe the government will introduce a scheme similar to the previous Help to Buy within the next 12 months, but it’s needed now. Housing developers are lobbying for its resurrection, but will they step up with their own initiative in the meantime?
Help to Buy closed to new applicants in England last year, with the final deadline to complete a purchase having now passed earlier this year. The most recent iteration of Help to Buy enabled first time buyers to borrow an equity loan to cover up to 20% (or in London 40%) of their property purchase price. The latest government statistics showed that 383,903 properties were bought using the scheme between 1 April 2013 and 31 December 2022.* While there is a mortgage guarantee scheme and opportunity for a Lifetime ISA, there is currently no scheme backed by the government which offers the same accessibility and inclusivity that Help to Buy once did.
Hampshire-headquartered Dutton Gregory Solicitors is a full-service national legal firm for private and corporate clients. The multi-award-winning practice has offices in Bournemouth, Chandler’s Ford, Poole, Liverpool, London, Winchester, and Woking.
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Hep-to-buy is great for middle class children wanting to get on the housing ladder, it is great for New Home Developers, their past profits are based upon it, and it is great for the Conservatives as they get donations from the Developers. Help-to-buy is rubbish for the housing nmarket as it allows a property asset to be sold at an artifically high value, as 20% or more of the value of the property is not being paid for upfront (rolled into a loan underwritten by the tax payer) so a new home semi is £395,000 when a second hand home sam style retails for £350,000, bu has no golden 20% free cash apended to it. Help-to-buy stokes house inflation as a big tranche of the 400,000 FTB's annually used to jump aboard this out of control train. If the government reintroduces it at the time many can not service their mortgage, this is polotical suicide, even if 80% of the Tory Developer donors are threatening not to fund the Conservaties in next election if it is not brought back. Any artificial stimulus skews the property market, SDLT holiday = 20% rise in values in 24-months - madness, rent caps in Scotland = higher rents once new tenancies come on, Mayor of London thinking rent caps are great, not understanding Private landlords and institutional landlords are borrowing cash at far higher rate due to BoE, so rents have to rise. I think all ministers/those who act as seniors need a basic qualification in business/economics prior to rolling out any scheme, or perish the though spend a week with those in the industry at the sharp end with decades of knowledge.
Further to the previous comment, the HTB scheme might have been well-intentioned, but it was a contributory factor to the current over-inflated nature of the property market. It further fuelled demand at a time when artificially low interest rates were already pumping up house prices to an unsustainable degree. As I've written before, a more realistic ratio between average house prices and average incomes needs to be restored - in short, property prices need to continue their downward trajectory and rising interest rates allied to falling confidence should operate to bring this about. Thus, many FTBs might be best advised (if their circumstances allow) to bide their time and wait for both property prices and interest rates to fall before buying, so saving many thousands in capital and interest over time.
If it is brought back in it requires proper regulation, and needs to be offered to the right people, not everyone. For instance I know a partner in a local firm of conveyancers who used it to buy her property a few years ago. Surely that is just abusing the system? Yes she had every right to do so. No she should have been stopped somehow from qualifying. That is one reason the system became so clogged up, if it were only available to people who actually needed help to buy, it would work far better.
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