The DCLG has released its latest data on the governments Help to Buy equity loan scheme, revealing that 88,000 people have now been given a much needed boost onto the housing ladder.
Help to Buy was created in 2013 to support hard-working taxpayers who could pay a mortgage, but couldn’t afford the high deposits demanded by lenders in the wake of the financial crisis.
Together with the government’s Help to Buy: NewBuy scheme – which offers 95% mortgages for those buying new-build properties, the number of new home owners has reached almost ninety thousand.
The scheme also continues to benefit first-time buyers overwhelmingly, with the vast majority of sales outside of London and at prices well below the national average.
According to the latest figures, since the launch of the Help to Buy equity loan and mortgage guarantee schemes:
80% of scheme completions have been made by first-time buyers
the average house price was £185,000, significantly below the national average
over 80,000 people have bought a home through the scheme
94% of Help to Buy completions took place outside of London
over half of Help to Buy completions have been for new-build homes
all part of the government’s long term economic plan to help hardworking people get the keys to their own home
The Prime Minister David Cameron said: "Thanks to Help to Buy, this government has helped thousands of hardworking people that otherwise would have been locked out of home ownership get the keys to their own home and enjoy the security that comes with it.
This is all part of our long-term economic plan to secure a better future for Britain – and, together with cutting income tax, lowering council tax bills and freezing fuel duty, the government is backing those who work hard and get on find the financial security they deserve."
Chancellor of the Exchequer George Osborne said: "It’s great news that the government’s Help to Buy scheme has now helped almost 90,000 people across the country achieve their dream of buying a new or bigger home.
We’ve only been able to help thousands of people in the UK because our long-term economic plan is working: through schemes like Help to Buy we’re supporting hard-working taxpayers buy their own home, driving an increase in house building in Britain, ensuring long-term housing supply and creating jobs."
Peter Williams, Executive Director of the Intermediary Mortgage Lenders Association (IMLA), comments: “It is safe to assume that many of the 40,000-plus borrowers who have taken advantage of the Help to Buy mortgage guarantee scheme would have struggled to make headway in the housing market without it. While other lenders are offering 95% loan to value (LTV) mortgages outside of the scheme, even the combination of Help to Buy and non-Help to Buy activity still falls short of supporting the number of first time buyers that were able to achieve their property owning ambitions before the recession. This scheme is currently scheduled to close at the end of 2016.
Homeownership is continuing to fall among young people and it is vital that government works with industry to establish a permanent solution to the first time buyer dilemma. Increasingly demanding capital requirements make it ever more difficult to lend to first-time buyers without large deposits. Unless the Help to Buy mortgage guarantee evolves into a permanent feature of the market, there are legitimate concerns among the industry that the revival of first time buyer lending will prove short-lived. Regulatory pressures now are firmly stacked against a mass market for high LTV loans even though these have been the bedrock for the first time buyer market for some considerable time.
There are a host of issues that need fixing in the housing market, and politicians must seize the 2015 election as a chance to start what will be a long term project. Part of the solution must be a permanent mortgage indemnity guarantee (MIG) to boost lending to first time buyers, which will also encourage builders to maintain and improve the supply of new homes. We are now getting close to half way in the life of the current scheme. In our view though recognising it has been very helpful the time for short-term sticking plasters has passed and future generations are relying on today’s political leaders to take a long-term view on how best to support high LTV loans given the regulatory changes now in place.”
Brian Murphy, Head of Lending at Mortgage Advice Bureau, comments: “Since their arrival, the Help to Buy mortgage guarantee and equity loan schemes have helped more than 80,000 consumers to buy their first home, with the vast majority being cash-strapped first-time buyers. The schemes have also been instrumental in normalising high loan-to-value (LTV) lending, which was very much a standard part of a healthy mortgage market before the financial crisis.
Even those lenders who don’t participate in the scheme have cottoned on to the fact that the market needs more affordable options for those climbing onto the property ladder for the first time. However, the Help to Buy mortgage guarantee scheme still accounts for a sizeable chunk of 95% products currently available on the market. There are concerns from both brokers and lenders that first-time buyers will suffer from a lack of high LTV options once the scheme is wound down next year.
The equity loan scheme has been given an extended shelf life until 2020, recognising the vital role it plays in propping up UK housebuilding. Our analysis shows that the scheme accounted for 24% of all new housing completions last year, and without it total completions would have dropped 5% annually. Although the scheme is playing a key role in keeping construction afloat, the government must pledge greater support to achieve the scale of change needed to overcome the housing crisis. The supply of new homes still lags far behind demand, and without affordable mortgage options many first-time buyers with small deposits will be left behind.”
Home Builders Federation Executive Chairman, Stewart Baseley said: "Help to Buy has helped tens of thousands of people onto the housing ladder who otherwise would have struggled to meet their ambition of home ownership. First time buyers in particular are taking advantage and the scheme is helping people in every part of the country. The resultant rise in demand is allowing builders to increase much needed house building levels. This is turn is creating tens of thousands of jobs and boosting local economies the length and breadth of the country.
Patrick Bamford, Director – Mortgage Insurance Europe for Genworth, the mortgage insurer, comments: "Over three-quarters of Help to Buy mortgage guarantee loans have been to first-time buyers providing a much needed boost to a part of society that has been underserved since the financial crisis, and now faces numerous hurdles to overcome as a result of stricter lending criteria.
News that the scheme has been most effective in the North West and East should dispel fears of Help to Buy creating a bubble in the South East or inflating house prices. The government initiative has proved its worth to first-time buyers across the country, which is why it is imperative that we have a long-term strategy in place to take over when it ends.
A failure to plan beyond 2016, when Help to Buy 2 comes to an end, would jeopardise these gains as lending to first-time buyers could easily fall back to the levels seen during the recession. A permanent scheme backed by private mortgage insurance would offer the prudent checks and protection the market needs while still allowing buyers with small deposits to access loans and fulfil their ambitions of home ownership.”
Communities Secretary Eric Pickles said: "The 2008 housing crash locked thousands of people out of the housing market, leaving them unable to fulfil their dream of owning their own home. That’s why the Help to Buy scheme is a key part of our long-term economic plan, helping over 88,000 hard-working households onto the property ladder with a fraction of the deposit they would normally require, while at the same time boosting housebuilding.
This, and our new Starter Homes initiative offering a 20 per cent discount on newly-built homes for first-time buyers, will continue to offer a strong alternative to the Bank of Mum and Dad.
Chief Secretary to the Treasury Danny Alexander said: "Help to Buy has now helped almost 90,000 thousand homebuyers across the UK buy a new of bigger home as part of this government’s drive to create a fairer society. We have been able to introduce this scheme – which is just one of the many ways that we’re helping people across the UK – because we’ve got the public finances and economy on a stronger footing, as the fastest-growing economy in the G7."
Source: The Property Reporter.