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Lenders must offer 95% LTVs on new build homes without Help To Buy – Phillips

by: John Phillips, operations director at Just Mortgages and Spicerhaart
  • 05/12/2018
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Lenders must offer 95% LTVs on new build homes without Help To Buy – Phillips
With Help to Buy definitely ending in 2023, we should be making plans now for how to cope without it.

 

Although it seemed as though there was not a huge amount in the Budget about housing, there was something hidden in the small print about Help to Buy.

It was confirmed that the Help to Buy scheme will run for another two years until 2023.

Officially, it is not an extension, but a new scheme which is actually much more restricted than the current one.

The £600,000 cap which currently stands for the whole country will be replaced with a cap of 1.5 times the current average first-time buyer price in each region, ranging from £186,100 in the North East to £437,600 in the South East, and £600,000 in London.

Last month’s announcement was a popular one, given so many had called for it to carry on, and it also brought a bit of finality too.

The government has said that 2023 is definitely the end of the scheme, putting a stop to any speculation about it carrying on further.

 

Too reliant on Help To Buy

I for one am a huge fan of the scheme.

There is no dismissing the fact that it has helped more than 170,000 young people get onto the housing ladder who either never would have been able to without it, or would have had to wait years before they could afford to.

But that does not mean I think the scheme is perfect, and I am concerned that we have become too reliant on it.

Yes, it is great that it has been extended to 2023, and we may be close to half a million people benefitting from the scheme when it finally does come to an end, but it will potentially leave the housing market in a bit of a pickle.

As a result of the scheme, many first-time buyers have bought bigger properties than they can really afford because the loan gives them that extra helping hand.

Plus, the scheme has encouraged lenders to offer higher loan to value (LTV) ratios, with the number of products available at 95% LTV more than doubling since the scheme began.

But once the scheme ends, lenders are unlikely to accept deposits as low as five per cent on new builds because of the risk.

I think lenders need to start to offer higher LTVs on new builds not on the scheme now in preparation for its ending.

If they don’t, there is a very real risk that the new build sector will grind to a halt when Help to Buy is pulled.

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