Perhaps unsurprisingly, the government recently issued statistics which focused on its ‘success’ of the Help to Buy scheme. However the figures – headlined by the 220,000 who have utilised Help to Buy to purchase a home – actually covered all HTB products not just HTB1 and 2 but also the ISA, shared ownership and London Help to Buy.
Specifically, when it comes down to HTB2, a drilling down of the overall figures shows a scheme which has been perhaps under-utilised since the middle of 2014, very early on from its inception. The figures for 2014 reveal 38,485 total completions, which dropped to 34,300 in 2015. Of course we don’t have the full figures for 2016 yet but a comparison of the first nine months of this year, compared to last, again shows completions down from 26,038 (2015) to 21,746 (2016).
I suspect, given that we’ve seen lenders slowly pulling out of HTB2 anyway over the last few months, that we’re unlikely to see full-year completions much above 27,000. However, adding up all the completions since October 2013, we are talking about over 100,000 borrowers securing mortgages through HTB2, with the vast majority (75%-plus) being of the first-time buyer variety. You have to wonder whether these individuals would be sitting in their first property without HTB2 and for that we should certainly applaud the scheme, and those who had the foresight to set it up.
Our concern has always been around what comes next; particularly in the 95% LTV mortgage category, and the appetite of the mortgage industry to remain active in this part of the market. As the government recently stated: “As previously announced, the Mortgage Guarantee Scheme will end on 31 December 2016 as a wide range of 95% mortgage products are now available from commercial lenders.”
The big question obviously focuses on the validity of this, and whether – even if this wasn’t the case – would the government have granted an extension to the scheme. I doubt this very much.
The good news is that the government is right – compared to 2013, 95% LTV mortgage products have increased from 125 to 256. However, our own LTV tracker recently showed that the numbers of 95% LTV mortgages has fallen this year. And the recent news that HSBC will not be offering 95% loans from the 1 January after HTB2 ends perhaps tells its own story about future lender appetite, and the situation potential first-time buyers might find themselves in. Unless you’ve got 10% deposit, you’re not getting a mortgage through HSBC.
The good news, however, is that this doesn’t appear to be the view of every single lender member of HTB2 – our own conversations appear to show a commitment to keep lending in this high LTV space, and a recognition of the benefits of the State guarantee and how it might be replaced by a private one. In that sense, the new year may not bring new gloom for first-timers and advisers may well be able to provide a much more reassuring message to their clients than we might have initially thought.
But as with all of these things, the proof of the pudding will be in the eating. In that sense, we may find an initial period whereby the handover from HTB2 to the next stage is not seamless. Lenders are obviously undertaking reviews on how they wish to proceed, and we may see more announcements (hopefully not along the same lines as HSBC) soon. In that sense, January might continue its theme of a fall in 95% LTV products, but we would anticipate this will pick up in the rest of the year and first-timers with a 5% deposit should have greater levels of choice as 2017 progresses.