Is Help to Buy on the ropes?
The new build scheme has had its controversies and detractors for some time. It’s previously been estimated that properties sold using the scheme are overpriced by as much as 15%.
Meanwhile it is commonly argued that Help to Buy has fuelled rapid house price gains by stoking demand.
History of the scheme
The Help to Buy equity loan scheme, to give its full name, was launched in 2013 by then-Chancellor George Osborne to help people buy new properties, and also incentivise developers to build new homes.
The government stumps up 20% of the purchase price up to £600,000, or 40% in London, and gives housebuilders a sense of certainty that that people will buy the new homes.
In terms of adoption it’s been a great success. Between April 2013 and September 2018 nearly 200,000 properties were purchased using the scheme, while output from housebuilders increased from 100,000 in 2013 to 180,000 in 2017 – though whether that’s due to Help to Buy or not is debatable.
Help to Buy is set to run until 2023 after being extended by two years by the government last year, though it will be restricted to first-time buyers and there will be a regional price cap on homes that can be purchased with the scheme from 2021.
What if Help to Buy collapsed?
Seeing as the scheme is seen as having fuelled higher house prices, it’s feared that if it was scrapped there could be some negative consequences for homeowners with a small deposit.
In the worst case scenario, without the scheme it is thought house prices could drop, causing some first-time buyers to end up in negative equity, where the value of your loan is worth more than your house. In that case you could end up being stuck with your current mortgage lender.
It’s generally considered that new builds generally attract a price ‘premium’, meaning the risk of house price drops are bigger with new build, even without the government scheme being involved.
It seems like the honeymoon is over for Help to Buy – It is now very much under the microscope of the government, housing industries and the public.
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