The latest statistics Help to Buy statistics remain positive and there is absolutely no doubt that it is a significant success and has helped large numbers of first-time buyers on to the property ladder.
The fact that the overwhelming focus of the scheme continues to be first-timers is self-evident and this has done much to deflate the arguments made, when Help to Buy was first introduced, that it would be used by existing owners and it would inflate prices in regions which needed no such intervention.
As stated, the figures published in June appear to dispel such concerns with 80% of all completions – both equity loan and mortgage guarantee parts – being made by first-time buyers. The average price for such purchases was £184,000, below the national average, and 94,000 people have bought through the scheme.
Some 95% of those completions were outside London and over half have been for new-build homes providing a much-needed boost to overall supply. Indeed there is a very strong argument to be made that without Help to Buy equity loan for new properties, UK plc would be even further behind in its attempt to generate new housing. Help to Buy has been the number one driver in terms of getting new-builds off the ground and bought since the scheme’s inception.
It’s particularly encouraging to hear this and the fact the shared equity part of the scheme is effectively guaranteed until the end of the decade – one might even suggest it will become a permanent part of the housing landscape – is all good news. We are all acutely aware that successful government-backed schemes have not always been evident over the past couple of decades and therefore we should applaud and encourage continued action in this area.
What comes next?
Of course there are two parts to Help to Buy and, to our mind, the mortgage guarantee element is equally important and requires a similar long-term approach and strategy to ensure the provision of low-deposit mortgages remains a structured and available part of the overall mortgage market. Generations of new buyers have only achieved their property-owning ambitions because they were able to secure affordable finance through the provision of high-LTV loans. It seems rather unfair that today’s generation, and perhaps future ones, may not be able to benefit from the same opportunities and therefore it is important that all stakeholders work together in order to provide this.
Help-to-Buy 2 was always, quite rightly, designed as a short-term, stop-gap solution but behind this was the understanding that the provision of such loans was a long-term problem that needed a long-term solution. It is an issue that could not be solved by government intervention and state money indefinitely – this is why we agree with the shorter term for the mortgage guarantee element but the question remains, what comes next?
The time is certainly right therefore for both government and the regulator to be discussing how and when to transition lenders to the private mortgage insurance sector and what forms of incentives, guidance or regulations should be put in place for lenders to take out credit risk mitigation such as mortgage insurance for this asset class going forward.
With the end date in sight, it is time to consider how an improved version of the scheme could support high LTV activity after a seamless transition to the private insurance sector. We need decisive action to make affordable mortgages permanently available to first-time buyers, while transferring risk away from the taxpayer.
Pad Bamford is business development director at Genworth Financial
