Possible Extension Of Help To Buy For First-Time Buyers

The Government is said to be considering extending the Help to Buy scheme to enable more first-time buyers to benefit from an equity loan and gain a footing on the property ladder.

Currently, the 20pc loan (40pc in London) is open to buyers purchasing a new-build property but the scheme, restricted to first-time buyers as of this month and limited by regional price caps, was intended to be scrapped entirely in 2023.

The Government is believed to have held discussions with the House Builders Federation (HBF) regarding the extension of the scheme in its present form beyond 2021, in order to tackle the problems facing buyers caused by the pandemic.

Craig McKinlay, New Business Director at Kensington Mortgages, said that a possible extension of the Help to Buy scheme makes perfect sense at this difficult time. It would without doubt increase confidence in consumers and the building industry which could otherwise suffer once the lockdown has been lifted.

Mr McKinlay added that it was vital to maintain stability in the numbers of skilled tradesmen for the benefit of the housing market and the economy and achieving this would be essential to recovery. At a time of great uncertainty, he said, any prospect of certainty, however small, was very welcome.

More continuity

Since its launch in April 2013, the Help to Buy scheme has assisted would-be buyers to purchase in excess of 248,000 properties. The Government offers a loan of 20/40pc towards the deposit while the buyer must provide a minimum of 5pc from their own savings.

Similarly, experts believe that extending the scheme will produce some beneficial results; allowing more time to prepare for the changes and enabling borrowers recently signed up to the scheme to go ahead with their purchase which might have been delayed by the lockdown.

Kate Davies, Executive Director of the Intermediary Mortgage Lenders Association (IMLA), said that borrowers who could have expected to complete their purchase before the end of 2020 may now have to reassess the situation. Any flexibility, she added, that would enable purchases to be completed after the original fixed deadlines will be welcome.

In future, Ms Davies said, as well as extending the scheme, some sensible changes could be made, for instance, regarding the types of property being built, in response to some of the criticism which has been levelled at Help to Buy over the years.

UK property market paralysed

The news about Help to Buy comes hard on the heels of the latest research that shows the UK property market has been paralysed by the Government-imposed lockdown measures intended to limit the spread of the Covid-19 virus.

The data from Home.co.uk show that restriction of movement across the UK has resulted in estate agent offices being closed until further notice, new listings plummeting and price movements rendered meaningless along with premature forecasts of falling prices.

Only a couple of months ago, the market appeared robust and exhibited significant potential for growth this year. Confidence was returning, prices were rising above seasonal expectations in all regions and momentum was increasing.

Situation set to worsen

Even though pre-pandemic low stock levels were the main drivers in both the sales and rental markets, the situation is set to worsen. The total stock of property for sale in England and Wales has fallen by 13pc y-o-y and London is once again hardest hit with 43pc less property entering the market in March of this year compared to March 2018.

Similar characteristics afflict the private rental sector (PRS). The lettings market has 14pc less stock than a year ago and 21pc fewer new rentals entering the market, leading to a squeeze in supply that is forcing up rents in many regions.

Consequently, for the time being, supply and demand have become effectively frozen and it is likely that they will not ‘defrost’ until after the pandemic has ended. Demand, being largely credit-based, looks set to return more quickly but supply may well be slower and start from a lower base.

No-one can forecast when the market will be ready to proceed, but the inbalance between future supply and demand is bound to cause upward price adjustments. In addition, demand will be boosted further by investors who had their fingers burnt in the stock market and seek safer investments post-pandemic.

Annualised average price growth across England and Wales stands currently at +1.0pc; the annualised rate of increase in house prices one year ago was -0.3pc.

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