The Help to Buy: Equity Loan scheme supported 21,026 sales with purchase value of £6,744m in Q4 2020, the latest figures from the Ministry of Housing, Communities and Local Government showed.
This was a 40 per cent rise on the same period last year. Of these, 83 per cent, worth £5.4bn, were sold to first-time buyers.
Craig Hall, head of broker relationships and propositions, at Legal & General Mortgage Club (pictured), said: “This scheme continued to be a helpful route into homeownership in the final months of 2020. . . but the government is clear it cannot last forever and will eventually stop in 2023.
“Housebuilders and the financial services industry are currently working on private alternative schemes, and we’re awaiting full details of how these will work,” he said.
Hall added that further policy interventions may be needed to help keep supply flowing and prices affordable. “The new planning bill announced this week aims to boost housing supply, but more may be needed to ensure the UK hits its target to build 300,000 new homes a year,” he said.
For the year 2020, the Help to Buy: Equity Loan scheme tallied 49,714 home purchases, which was a drop of five per cent on 2019. The purchase value for the year was £15,707m. Again, first-time buyers accounted for 83 per cent.
Storing up issues
However, not everyone was convinced by the scheme’s efficacy for borrowers, particularly over the longer-term.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, argued that Help to Buy may have stored up problems for the future. “When the loan is eventually repaid to the government, the amount to be paid back depends on the value of the house at that time.
“If you borrow 20 per cent of the purchase price, you repay 20 per cent of the value after five years, so when prices rise, so do your repayments,” she said.
Coles added that on the other hand, if prices fell, equity in the property may not build to a level that would let the owner remortgage onto a standard product. “They could end up being stuck paying fees to the government,” she said.