Help to Buy is a government-backed scheme launched in 2013 to help first-time buyers get on the property ladder.
Borrowers get an equity loan, up to 20 per cent of the home with a five per cent deposit and 75 per cent mortgage to make up the rest, to buy a new build property.
The loan was interest-free for the first five years and the government retained a share in the property until the loan was repaid.
The scheme closed for new applicants in October last year, having helped around 375,654 homes purchases with 84 per cent being bought by first-time buyers, and the legal completion deadline is today.
The housebuilder completion was extended by over a month at the start of the year from 31 January to 17 March. Brokers earlier this year pried the extension, noting that Help to Buy applicants were “being put through the wringer”.
More schemes, more housing and better policy needed
Brokers, and other mortgage industry actors, have expressed concerns that there is not an adequate replacement for Help to Buy, with a patchwork of private and government schemes not big enough to fill the gap.
This along with the rising cost of living has meant that it is more challenging for first-time buyers to save, so many are putting plans on hold.
Kylie-Ann Gatecliffe, director at KAG Financial, said: “I feel this part of the market is really dwindling. I have definitely noticed a void since Help to Buy has been withdrawn, as this combined with the cost of living crisis and rising rents has meant many hopeful first-time buyers have had to put the breaks on saving.
“We really need more support from the government to help get these people that are stuck in rented on to the ladder.”
James Alexander, mortgage director at Alexander Southwell Mortgage Services, agreed and said that while there were schemes like shared ownership and First Homes they would not “fully cover the gap left by the Help to Buy scheme”.
“The Help to Buy scheme had the best of both worlds, allowing the client to get a more expensive home and also providing them with lower monthly payments, whereas the other schemes do not offer that”, he noted.
Alexander continued: “Support needs to be targeted at areas where first-time buyers face the most significant challenges, high property prices, deposits, and affordability.
“It is essential to ensure that the schemes are accessible and inclusive to all. Overall, the government and lenders should work together to provide a range of schemes.”
Amit Patel, adviser at Trinity Finance, continued that first-time buyers needed “affordable housing without the waffle”.
“Successive governments for years have sat back and done nothing to build houses, local planning authorities are a ball ache to deal with, with schemes taking months or even years to get approved which adds costs to the development,” he noted.
Samuel Mather-Holgate, independent financial adviser at Mather and Murry Financial, said the “lack of ambition” from the government and the “vacuum created” after the Spring budget on property policy was “irresponsibly boneheaded”.
“The government even lacks targets for new homes now, let alone a coherent policy. They are so blatantly out of touch with those wanting to get on the housing market, and they clearly don’t care either.
“The Tories are betting that first-time-buyers aren’t going to be first-time voters come next year. Any decent government needs to stimulate the housing market with a two-pronged attack. They need to incentivise home builders to create beautiful yet affordable new housing and a scheme needs to be developed to make it easier for those wanting to buy their first home. At the moment, there’s nothing,” he added.
What is out there now?
Sarah Thompson, managing director at Mortgage Scout, said there were a range of schemes to support first-time buyers, including shared ownership, First Homes scheme, Mortgage Guarantee scheme and Deposit Unlock.
Shared ownership, although not exclusively for first-time buyers, allows prospective buyers to purchase a share of a property, between 10 and 75 per cent, and pay rent on the remaining share to the landlord.
Another option is the First Home scheme, which was introduced in 2021, and offers at least 30 per cent of the market price of a new-build home.
The mortgage guarantee scheme is another option and was brought out by the government in 2021 to address a shortage of high loan to value lending due to the pandemic. It was extended by a year in December last year and has helped more than 30,000 buy a home.
Deposit Unlock, also launched in 2021 in response to Help to Buy coming to an end, offers participating mortgage lenders protection on mortgage products so they can lend up to 95 per cent LTV. It is eligible for new builds.
Lifetime ISA can be an option for those aged between 18 and 39 to help them save, it can be used for a first home or for retirement. Users can deposit up to £4,000 a year and the government will add a 25 per cent bonus each year up to a maximum of £5,000, Thompson said.
James Vince, managing director at Castle View Finance, added that there were several private companies offering first-time buyer products like Gen H and Proportunity. A run-down of different options can be found here.
He explained: “These schemes and offerings can feel like a transparent solution compared to the misunderstandings around the Help to Buy exit from the scheme, where requirements for independent valuations etc are required to fulfill scheme requirements.”
Gary Boakes, director at Verve Financial, noted that some lenders offered their own first-time buyer schemes, like Nationwide’s Helping Hand product, Barclays Springboard mortgage or joint borrower sole proprietor products.
According to Moneyfacts, there are around 161 deals at 95 per cent LTV, which has been growing since the start of this when it stood at 132.
Brokers suggest more financial education and a student loan-like scheme
Boakes suggested a scheme similar to a student loan where a loan is taken out and then is paid back through their salary.
“Imagine if the government adopted the same idea for a housing deposit, and gave every first-time buyer between 18 and 30 a housing loan to help buy their first home and pay back via their salary over a period of time,” he said.
Vince added that a shift from ‘financial help’ to ‘financial education’ which is sadly lacking in most formal educational settings.
“This focus on education could enhance the understanding of deposits, mortgage obligations, long-term financial commitment and reliances.” he added.
