If the Help to Buy equity loan scheme is allowed to expire its effect on the market would be like removing a foundational piece of a Jenga tower.
That was the comparison made by Adrian MacDiarmid, Barratt Homes’ head of mortgage lender relations at My Home Move’s annual conference at The Belfry in Birmingham yesterday.
Behind his creative analogy was a serious point – with the scheme being so key to encouraging new housing developments why not make it a permanent part of the UK housing market?
It is scheduled to expire in 2021.
MacDiarmid said: “If you operate a scheme for long enough, and bear in mind shared equity in one form or another has existed continuously since 2005, it’s like Jenga.
“Right at the beginning if you pull one [piece] off the top it doesn’t make any difference but once something is really embedded arguably it’s a fundamental piece of the market and should be a permanent feature of it going forward.
“If you do take it away you’ve got to be really careful around what scaffolding is built around it to sustain that market.
“So the conversations are ‘what does the landscape look like without Help to Buy?’ or ‘should there be a landscape without Help to Buy?’”
MacDiarmid was on a panel which included Stephen Smith, director of housing partnerships at Legal & General.
Smith was even more persuasive that the scheme should be made a permanent one – and he doesn’t expect the expiry to go ahead in 2021.
He said: “I don’t believe the government has lost any money on Help to Buy – by definition it’s probably making money.
“So why would it not keep it as a permanent feature of the market, particularly if it’s needed to underpin the housebuilding that we need?
“With the next election set to be 2022 it’s not a good time to pull a major scheme in 2021.”
Despite their worries neither MacDiarmid nor Smith were willing to stick their noses out and predict new build activity falling off a cliff if the scheme is put to bed.
Smith made the point that the Help to Buy mortgage guarantee scheme was allowed to finish at the end of last year and high loan-to-value lending has continued since.
The other two panellists, Keith Street, vice chairman of group lending at Kensington and David Mackie, president of the National Association of Estate Agents, discussed how those looking to remortgage using the scheme have a fraction of the purchase product count to choose from.
Street admitted: “We should have seen this [coming] at least at the time of the launch, then we could have had a solution ready and waiting.
“For people who don’t have access to a deposit… to suddenly stop that [support from the scheme] would be horrendous.”
Mackie has seen dark stories of couples who split up struggling with the debt from the mortgage.
With the Help to Buy equity loan the government lends the borrower 20% of the new build or 40% in London.