I saw a headline recently which ran, ‘Whatever happened to Help to Buy?’ and I had to agree with the sentiment that the media and political ‘noise’ around the Government scheme has certainly died down in recent months. It has been helped of course by the fact that the largest myth surrounding HTB has been exposed as just that – the scheme is not responsible for rising house prices (particularly in the Capital) and it is predominantly being used right across the country and mostly for the benefit of first-time buyers.
In that sense it has been something of a triumph for the Government and the most recent figures for Help to Buy 2 – the mortgage guarantee element – were also positive. Since applications have been accepted, just over a year ago, 30,629 HTB2 completions have taken place and there have been almost 24,000 first-time buyers amongst that number benefiting from the scheme. There’s no doubting that HTB in both its forms has significantly improved the lot of many buyers, not just first-timers, since its inception.
Indeed, HTB has become something of an accepted part of the marketplace albeit one which is designed to be temporary. HTB1 may evolve into a more permanent fixture given that it is not due to finish until the end of the decade, but the more pressing issues appear around HTB2 which is two years and counting from being closed for good.
Only 3% of all mortgage completions have been as a direct result of the scheme over the past year and this shows the need for ongoing, greater product choice in many non-HTB related areas. We know only too well that the Scheme is particularly rigid in its design and therefore many lenders have either chosen to take part, but in only certain product areas, or have decided to opt to offer HTB-related products but either take on the risk themselves or use a private mortgage insurance guarantee instead.
Given that 97% of completions were outside the scheme, we can see how big a mortgage ‘world’ exists around it. Indeed, high Loan To Value (LTV) lending in certain bands still remains relatively low and lenders are not choosing to insure above a certain level when it comes to other product options. We have spoken a lot about the cliff-edge that could exist when HTB2 winds up at the end of 2016 and perhaps now is the time for the bigger banks in particular, to look at how they offer products in those different bands and how they transition their HTB business across over the next couple of years.
Private mortgage insurance of course remains the most obvious option to do this and first-time buyers in particular would certainly benefit from more flexible product options – not just those that are HTB packaged.
It is understandable that some banks view their involvement within HTB as non-negotiable and providing something of a political appeal to it, however, this does not mean they can’t use private options outside the scheme for other LTV bands. Indeed, spreading the risk in such a way might well be the right way to go; it would certainly provide a more certain future for high LTV lending and this will be absolutely necessary if we want to move successfully beyond State intervention to a non-taxpayer-funded solution.