Controversial Help to Buy policy to boost home ownership to end tomorrow
A flagship policy to boost home ownership among young people will come to an end tomorrow. The Help to Buy Scheme, launched in 2013, will be wound up, after more than 350,000 people used it to buy their first home, with more than £2.2bn of support last year.
But some property experts have warned the policy, while helping people onto the housing ladder, has distorted the market through the scheme which gave first-home owners access to lower interest rates and properties which only required a 5 per cent deposit.
“The difference between the London Help to Buy and the national scheme could have caused some disruption in the market”, Emily Williams, director of residential research at Savills, told City PM
Buyers joining the scheme could borrow 20 per cent of the purchase price, interest-free for five years, or up to 40 per cent in London.
Of all new home sales since the scheme was launched, it accounted for 31.4 per cent of purchased properties. Over the last five years, the average deposit for a first-time buying was 24.2 per cent.
Between 10 to 15 per cent of those who used the scheme would have been able to buy a home otherwise, according to analysis by the Bank of England.
The government claims 45 per cent of those who used the scheme would have been able to afford the property otherwise.
Both buyers and developers criticised the decision to end the equity loan scheme.
Chief operating officer of cash buyer of homes Upstix, Phil Tennant, said: “It’s just the latest in a series of setbacks for would-be homeowners.”
The end of Help to Buy, coupled with higher interest rates and the ongoing affordability crisis, will make more people delay or shelve plans to buy a home, Tennant added.
But the scheme always proved controversial, with critics pointing out the subsidy inflated the price of new builds and ultimately reduced affordability.
“Help to Buy was a subsidy to the construction sector as much as it was to individuals”, David Smith, head of property litigation at JMW Solicitors told City PM
Smith, however, was concerned that, without the added incentive, developers wouldn’t continue to build at the same rate.
Ben Everitt MP, who sits on the levelling up, housing and communities committee, said the policy intervention could be defined as a success but “it was still a demand-side reform”. “I’d much prefer to see supply-side reform looking at the type of housing we need, like 1 or 2 beds and retirement homes”, he told City PM
A spokesperson for the Department of Levelling up, Housing and Communities said: “Supporting aspiring homeowners is a Government priority. We are aware that a small number of Help to Buy customers are experiencing building delays so we have extended the practical completion date to 28 April and the legal completion date to 31 May to make sure people are able to purchase their homes.”