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The End of Help to Buy

The Help to Buy mortgage scheme will be brought to a close by the end of this year. Chancellor Phillip Hammond, mentioning that it had ‘achieved its purpose’, confirmed the closure of the mortgage scheme by December 31st.

The scheme, launched in 2013, was launched to allow more people to get on the housing ladder. For buyers, only 5% of the property’s total value was required for a deposit, with the remaining 95% being covered by a mortgage. According to the Treasury, over 86,000 homes have been purchased to date with the support of the scheme.

However, in Hammond’s view, the return of confidence to the market and greater contributions from private lenders mean that the scheme is no longer required. Treasury committee chairman Andrew Tyrie supported this view, stating that inflation of house prices and substantial liability for the taxpayer were among the scheme’s problems. He instead called attention to the “undersupply of homes” and mentioned that this presented a big challenge, both in the rental and purchase markets.

The scheme had also been criticised for its potential to confuse buyers, in regards to lenders offering competitive rate mortgages when they were (at that time) shifting away from that aspect of the market. Mortgage and protection adviser from Furnley House, Kevin Dunn, expressed his hopes for Hammond’s closure of the scheme:

"Some lenders were not part of the scheme and still offered 95% mortgages like Nationwide. Hopefully with sensible lending decisions based on affordability, lenders can continue to lend 95% of a property's value without having to pay for the guarantee."

Russell Quirk, however, predicts the aftermath of Help to Buy ending could be seen as a “real retrograde step” as it leaves buyers, particularly those purchasing their first home struggling to get on to the property ladder. The founder of online estate agent eMoov.co.uk also commented on the great shift in attitudes:

“...[The] announcement by Philip Hammond marks a significant change in the ideology of this new Prime Minister and her Government – an ideology that clearly does not share the Cameron/Osborne love affair with aspirational homeownership.”

Although Quirk’s predictions may be reflected in the decision’s initial aftermath, he does highlight the potential long term effects, which may prove more beneficial to homebuyers in the long run.

“I suspect that the direction of travel for the Prime Minister is to now promote build-to-let, which is an easier win than chasing ever higher house prices. Although it will be seen as an attack on those looking to buy in an ever inflated market, the Government’s record of actually building new property has been less than woeful, and so any attempt to address the shortage of property stock should be commended at the very least.”

A study by eMoov.co.uk found that by spring 2017, almost half of property prices in England will be too expensive for buyers to purchase using the Help to Buy ISA scheme. For those wishing to enter the property market, the ending of the scheme may actually help in the long-term. As stated by Quirk: “If we do see this supply and demand imbalance start to level out, prices will follow suit, resulting in a more realistic ask for those looking to buy.”