The collapse of the Help to Buy equity loan scheme could push buyers into negative equity, BLP insurance director Phil Harris has warned.
While Help to Buy is scheduled to run until 2023, the permissions of the UK’s second biggest housebuilder Persimmon’s are said to be under threat after it announced a bumper profit of £1.1bn last week off the back of the taxpayer-funded scheme.
Reportedly Housing Minister James Brokenshire is concerned about how the housebuilder has used the scheme, raising issues of leasehold, build quality and accountability – and that’s not to mention its £75m payout to former chief executive Jeff Fairburn last year.
Harris said: “In dragging Persimmon over the coals, it seems that the government is finally waking up to the false economy that is Help to Buy. The scheme has been propping up the residential sector and keeping prices artificially high in an otherwise stagnating market.
“Its collapse could leave thousands of first-time buyers in negative equity, with the aftershock having the potential to severely impact on the wider industry – blowing the government’s optimistic housebuilding targets out of the water in the process.”
He added: “Despite Persimmon’s bumper £1bn profit announcement last week, the contracting behemoth has been struck a hammer blow after Housing Minister James Brokenshire’s assertion that its role in Help to Buy is to be reviewed.
“While the optics don’t look good, especially as taxpayers money is involved, Persimmon has done what many others are doing – taken advantage of a well-meaning if ill designed initiative to boost profits.”
Harris made the comments after the news that UK construction has contracted for the first time since March 2018, which he blamed on fear of a potential Brexit cliff face, lethargic commercial activity and major concerns about the long-term viability of Help to Buy.