When the Help to Buy equity loan scheme ends it could be replaced by private schemes or councils offering similar local schemes, Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, has predicted.
The Help to Buy end date is in 2023, but starting in 2021 it will only be available for first-time buyers and restricted to homes up to a certain price, depending on the region.
The caps will be set at 1.5 times the regional average first-time buyer price currently forecasted, and there will be a maximum price of £600,000 in London.
Sedgwick said shared ownership will become more prominent and innovation is needed by lenders, but lending at higher loan-to-values doesn’t solve everything.
Sedgwick said: “A lot of lenders extend their LTVs up to 90% LTV but that doesn’t resolve affordability issues. I don’t see 100% mortgages coming back on a big scale. We’ll come up with different solutions, maybe 90% mortgages, topped up by 5% from the builders and 5% from the borrower’s families.
“It’s possible councils could perhaps top it up after Help to Buy. And the stigma from shared ownership is slowing disappearing.”
Martin Foad, mortgage consultant at London Money that specialises in Help to Buy, said that the scheme has helped many people, especially those who couldn’t afford a deposit, but has perhaps given developers an unfair advantage.
He thought it’d be difficult for councils to offer their own regional schemes to replace Help to Buy as many councils, particularly in London, have long waiting lists for properties and administering their own Help to Buy scheme may not be high on their agenda.
Foad said: “I don’t think putting it into a local area like this is the right way forward. I think it has be a national scheme, government run or with government oversight.
“Help to Buy certainly with new builds has helped out developers, so I think widening it to cover the whole of the market, so it includes second-hand properties as well as new builds, would be good, giving people a foot onto the housing market.
“That said the market has changed a lot and there’s a lot of lenders prepared to go to 95% LTV, so we’d get first-time buyers to consider that as well.”
Craig Hall, head of broker relationships and propositions, said when the scheme ends it’s vital that the industry works together to ensure first-time buyers remain supported and have alternative options to Help to Buy.
He said: “It’s likely that we will see private schemes coming to market to help fill the void, however during the previous Legal & General New Build Forum, the Ministry of Housing, Communities and Local government hinted they are considering alternative schemes to Help to Buy.
“This could mean an increase in support for shared ownership or perhaps the Starter Homes scheme is part of a longer-term replacement.
“What we are already seeing is a positive movement from lenders to help first-time buyers. With a return to higher loan-to-value lending and the introduction of family assist mortgages, whether that be joint borrower sole proprietor or parents acting as a guarantor.”
Foad said that the market has improved its Help to Buy remortgage offering.Mortgage Introducer previously reported in November that there were only 85 remortgage options for the scheme in the country, but Foad said there’s now much more choice.
Foad said: “It’s improving and the initial lenders that were on the scheme from the start have clients whose rates had finished, but they have very competitive follow on rates.
“So, instead of just finishing a rate and being put on an SVR, they’re moving onto another rate like everyone else. There’s more choice, it’s important. Mortgages are long-term commitments and you can’t just look at the initial rate.”