What does the future hold for Help to Buy?

Lenders are urging the government to clarify the future of the Help to Buy scheme, warning that major changes could risk “significant market disruption.”The Help to Buy equity loan scheme was introduced in April 2013 to help those with small deposits buy a new home. It is due to run until 2021, but as yet the government hasn’t given any indication as to what might replace it. How Help to Buy worksUnder the scheme in England, homebuyers purchasing new build properties costing up to £600,000 only need to put down a 5% deposit and the government will provide a 20% equity loan interest-free for the first five years (rising to 40% for buyers in the capital). After five years, interest on the loan will initially be charged at a rate of 1.75% and will then increase every year by the rate of inflation as measured by the Retail Prices Index (RPI) plus another 1%. Similar government-backed schemes are also available in Scotland and Wales. According to trade organisation the Intermediary Mortgage Lenders Association (IMLA), which represents 43 lenders, the Help to Buy equity loan scheme has led to the construction and purchase of nearly 170,000 new homes in England, 81% of which were purchased by first-time buyers. Nearly half of these, it is estimated, would not have been able to buy their homes without assistance from Help to Buy. Kate Davies, executive director at IMLA, said: “Given its success – and its importance in boosting both home ownership and housing supply – we believe that some form of government support should continue.“Lenders and borrowers place heavy reliance on the scheme, and a major step-change to arrangements would risk significant market disruption and potentially undermine the Government’s ambitious targets for new housing supply.”Possible options
There have been plenty of rumours that Help to Buy may be extended or amended. Some have speculated that the scheme may be restricted to first-time buyers only rather than home movers too, or that the currently £600,000 property value limit may be reduced. Ms Davies said: “If changes to the scheme are being proposed, lenders will need appropriate notice in order to plan ahead and deliver positive outcomes – hence our wish to have clarity as soon as possible on the Government’s intentions.”Find out more about Help to Buy in our guide to Help to Buy.