Hammond’s extended Help to Buy scheme
John Philips, operations director, Just Mortgages and Spicerhaart
Extension of Help to Buy scheme until 2023 is great news, but where are the incentives to buy from existing stock?
At first glance, the Autumn Budget didn’t seem to have much to say about housing; a stamp duty freeze for first-time buyers purchasing shared equity homes, £500m for 650,000 new homes and a limit on lettings relief – not exactly ground-breaking.
But, hidden in the small print was a promise to keep the Help to Buy scheme running for another two years – a much more significant announcement.
The government said: “To ensure future help is targeted at those who need most help into homeownership, the Budget announces that from April 2021 a new Help to Buy Equity Loan scheme will run for two years before closing in March 2023.”
The extended scheme will be more restrictive than the current one. Firstly, it will be limited to first-time buyers and secondly, the £600,000 cap will be dropped and replaced with a price cap depending on where you live, ranging from £186,100 in the northeast to £600,000 in London.
These caps have been set at 1.5 times the current average first-time buyer price forecast in each region.
Originally launched five years ago, the scheme sees the government lend buyers up to 20% of the cost of the home, the buyer then only needs a 5% cash deposit and a 75% mortgage to make up the rest.
Between the scheme’s launch in April 2013 and its fifth birthday in March this year, almost 169,102 properties were purchased using a Help to Buy loan.
It has been one of the most significant schemes in the housing market in recent years, and there have been calls for it to be extended, so at least this announcement provides some clarity to the ‘will they won’t they’ question, especially as the government has stated that after 2023 that’s it. No more extensions.
And the scheme certainly has its critics, with arguments that it has inflated house prices, and that wages have not increased enough to put those on the scheme in the position they hoped they’d be in when they started paying back the loan.
But there is no doubt that it has helped thousands of young people who would never have been able to afford a home otherwise, become homeowners and I am an advocate of Help to buy.
I think it has been fantastic for first-time buyers and has been a huge boost for the construction sector, and while I am really pleased to see the scheme continued until 2023, I would have liked to have seen it extended so that first-time buyers are incentives to purchase homes from the existing market as well as new builds.
By only making Help to Buy only available on new builds, first-time buyers will continue to be pushed away from the existing market which causes problems for second and third steppers looking to move on – including those who bought using the Help to Buy scheme and are looking to move on.