Reports this week suggested that the government is looking at relaunching a version of the Help to Buy scheme, though details remain scarce around what this new support measure might look like.
Brokers were divided on the idea of a new Help to Buy, but told Mortgage Solutions that an ideal version of the scheme would cover more than just new builds, offer more targeted support to those who need it, and potentially even be combined with a more comprehensive new home building programme.
Greater oversight needed for a new Help to Buy
James Miles, director of The Mortgage Quarter, questioned whether it was fair to view the original Help to Buy scheme as unsuccessful, given the thousands of homes it meant could be purchased, mostly by first-time buyers.
However, he said that were the scheme to be relaunched, there should be greater regulation over who could qualify, based on earnings. He also said the scheme would need to be monitored so that builders were not able to inflate prices, ensuring they are kept “within a reasonable percentage of the average house price”.
Miles added: “There isn’t a silver bullet for home ownership but the rich/poor divide is widening so these types of schemes will only help the lower earners become property owners.”
Looking beyond new build
If the Help to Buy scheme is to support the housing market, it needs to be available for the whole market, rather than just being limited to first-time buyers or new build homes, argued Justin Moy, managing director of EHF Mortgages.
He added that for pre-existing homes, it should only be an option if they have an Energy Performance Certificate rating of at least a C, since this would help “push for greener homes across the UK”.
Riz Malik, director of R3 Mortgages, agreed that a new Help to Buy should not be restricted to new builds.
He explained: “By expanding this scheme to encompass existing housing, first-time buyers will have access to a wider range of options, and it can prevent artificially inflated prices for those eager to purchase their first property.”
Targeting will mean it makes a difference to the right borrowers
Adam Hosker of Cyborg Finance said that Help to Buy had been a “great initiative”, but was not without its flaws.
He argued that the government could stabilise its impact on inflating house prices by setting “conservative regional price caps”, which would mean that the scheme helped people buy their first home, and not support the well-off in purchasing a bigger house.
Hosker continued: “Some argue that it shouldn’t be available for new builds but that disincentivises building. We need to build. It should only be available on quality, forward-thinking new homes with high energy efficiency.”
Boosting supply should be the focus
According to Rhys Schofield, managing director of Peak Mortgages and Protection, one of the big problems with the initial Help to Buy scheme was it allowed the government to “wash their hands of any central strategy to build enough houses”.
He suggested that if it was restored, it should be coupled with a nationwide housebuilding scheme. “Unless the supply issue is addressed we just have this constant inflationary pressure on prices,” he concluded.
Malik also called for government incentives to boost production of starter homes, which he said would help people take their first step onto the housing ladder.
Growing buyer deposits
Any government scheme aimed at helping buyers should be targeted at deposits, according to Scott Taylor-Barr, financial adviser at Carl Summers Financial Services.
He proposed a deposit-matching scheme, where the government matches the amount saved by the buyer up to a maximum of 12.5 per cent in the form of a loan which was then repayable once the property was sold.
He explained: “The loan is not an equity share and the amount repayable is only what was originally borrowed and should be available on all property, not just new builds. Various other terms and conditions would be needed; so no renting the property out unless in specific situations and first-time buyers and other select groups only, for example.”
Aaron Strutt, product and communications director at Trinity Financial, agreed that Help to Buy had helped a lot of younger buyers get onto the ladder, but noted that they were not always easy for brokers given the affordability issues and “constant changes” to mortgage offers.
He added: “More affordable and targeted first-time buyer mortgages would help the market move forward. Maybe providing help to longer-term renters or those without access to the Bank of Mum and Dad.”
Strutt also suggested that some form of support for first-time buyers which would help them pick up the flats coming onto the market as landlords sell up would also be useful, though warned “there would need to be a price cap and maybe a salary limit” were it to be introduced.
Creating a price bubble is inevitable ‒ but worth it
Adam Thomas, managing director of Thomas Group Financial Services, noted that the Help to Buy scheme had helped many of his clients purchase their first home, and so he would welcome a new version.
He noted that if a borrower tried to use the scheme without broker help, it could be extremely difficult, while the fact that the borrowing amount was capped at 4.5 times income was also a drawback.
Thomas added: “I don’t see how the government could introduce a scheme to assist first time buyers or any buyer demographic for that matter which allows those clients to obtain better borrowing, or lower rates compared to the rest of the market, or both, without creating a bubble in that price point.”
