So this week, Mortgage Solutions is asking brokers: How do you think these changes might stimulate the market?
If you were expecting that an overhaul from the government of Help to Buy (HTB) would mean significant changes, ideally positive, addressing its flaws then unfortunately you’re going to be sorely disappointed.
It’s no exaggeration to say the HTB scheme has very serious questions surrounding it. It’s a Christmas Tree initiative meaning that each of the players in the process gets to hang things on it allowing them to generate their own bit of profit.
It’s expensive, inflexible and un-transparent but what’s insidious about the scheme is how it’s marketed to first-time buyers (FTB) to get on the ladder.
The government will laud the 210,000+ properties purchased using the scheme but 81 per cent were FTBs, meaning 171,000 people dreaming of owning their own home have been taken advantage of.
If there was a genuine overhaul coming, I’d could talk glowingly about how the equity loans in the scheme are a fixed value amount not a percentage.
I’d be delighted to say that the mounting fees at the beginning, throughout and the end of the process were regulated.
I would be welcoming the news that the government had worked with lenders to guarantee a full suite of remortgage options and I’d be able to understand why the average purchase price for those FTB’s using HTB is 20 per cent higher than the average FTB purchase price.
Don’t worry though, the overhaul means that the scheme going forward will only be available to FTBs and we will have regional purchase price caps. So, it’s all sorted.
Allowing buyers to extend their mortgage to beyond 25 years brings the HTB scheme in line with lender criteria, which previously had perhaps made it difficult for some buyers to qualify for the scheme.
If the issue being assisted is, that in higher priced property areas for buyers, there is an inability to save enough for a deposit as a result of higher living costs, then setting an arbitrary limit on the length of the mortgage allowed is counter-intuitive.
At the moment there are at least 25 lenders that engage with HTB, all offering a different proposition to the next. With this, the majority of mortgage applicants should have an option when it comes to securing a mortgage, subject to the usual caveats of course.
Currently, remortgages appear to be a bit more restrictive in terms of offerings, with approximately 15-20 lenders allowing a remortgage when not repaying the HTB loan. I think this would have changed organically regardless of these changes being implemented.
When it comes to stimulating the market, there is no need to reinvent the wheel.
What is needed is more housing and so, while these schemes are welcome and offer an opportunity to some who otherwise would not be able to buy a property previously, if owning a home is to become a reality for everyone rather than the few, then a solid commitment to house building must be implemented and followed through.
Since March 2018 around £43bn worth of property has been bought under the HTB scheme. It is safe to say that HTB has been one of the most successful government initiatives in decades as it has driven the growth of home ownership.
Extending HTB a further two years past 2021 is a welcome step for the industry. And though it will be restricted to first-time buyers, 81 per cent of current scheme users are first-time buyers so we don’t anticipate it will have a negative effect on the market.
The part of the amendment which stands out is that consumers will be able to take the equity loan for up to 35 years rather than the previously mandated 25 years. This is good news for homeowners in the scheme as they will have greater security and stability.
As an industry, we already have a diverse range of criteria for lenders to enable us to give consumers the best solution possible but there is still room for improvement.
We would like to see more lenders entering the HTB remortgage market. More lenders will mean consumers have a lot more suitable choices as it is more competitive.
Going from a market with a small number of players and options for consumers 18 months ago, we now have a very healthy and effective market for HTB homeowners looking to remortgage. We must continue to offer more choices to uphold the scheme’s successful legacy.