Latest data reveals success of UK govt’s flagship Help to Buy schemes

Over 150,000 people have achieved their aspiration of home ownership In the UK since the government’s flagship Help to Buy housing schemes were launched two years ago, the latest data shows.

Some 80% were first time buyers, the average house price was £188,380 significantly below the national average, over half were for new build homes and 95% of Help to Buy completions took place outside of London.

The figures confirm that it is first time buyers, for whom the scheme was designed, have indeed benefitted the most with 118,000 households having bought their first home via the scheme.

First time buyers will have a further boost from the Help to Buy: Isa launched in December 2015. The scheme has already helped a quarter of a million first time buyers save for their first home by providing a bonus of up to £3,000.

With almost all completions outside London, the highest number of homes through the mortgage guarantee scheme have been in the North West region and the equity loan scheme for new build properties is particularly prevalent in the South East region.

First time buyers and second steppers will also have a further boost from the London Help to Buy scheme launched in February 2016. The scheme supports purchases of new build homes in the capital by offering a 5% deposit backed by an equity loan of up to 40% from the government.

Figures for the mortgage guarantee scheme also show completions have been least concentrated in regions where house price growth is highest. In London the scheme makes up just 1% of all mortgage lending compared to an average of 3% across the country.

Over half of the homes bought through Help to Buy are new-build properties, helping to contribute to the 14% rise in private house building since the launch of Help to Buy.

This has supported new housing construction output with total new housing construction activity in 2015 the highest on record. Annual housing starts are now at an eight year high with over 700,000 new homes built since 2010.

‘The government is committed to helping people achieve the aspiration of buying their own home, and all our Help to Buy schemes have now helped almost half a million people,’ said Chancellor of the Exchequer George Osborne.

However, he pointed out that while the stronger financial system means the Government expects banks to start to exit the Help to Buy Mortgage Guarantee scheme, the other Help to Buy schemes go from strength to strength.

‘Increased confidence coupled with our clear ambition to deliver one million new homes is leading to more house building with the numbers of new homes at a seven year high.
Government backed schemes are helping an increasing number of people to realise that home ownership is realistic for them,’ said Communities Secretary Greg Clark.

Housing Minister Brandon Lewis acknowledged that there is more work to be done to get the homes built people want but described the figures as good news which shows that people are really taking the opportunities available and getting into home ownership.

House builders have also welcomed the role Help to Buy has played in boosting supply.
‘Help to Buy continues to help stimulate demand for new build homes. As a result we have seen huge increases in house building activity and the supply of much needed new homes,’ said Stewart Baseley, executive chairman of the Home Builders Federation.

‘We estimate the larger house builders have increased output by 50% since the trough with overall supply up by 37% in the last two years. The industry remains committed to working with government on policies that enable it to maintain increases in build rates such that more people have access to high quality new homes,’ he added.

But Doug Crawford, chief executive of My Home Move, believes there are still considerable hurdles for those aspiring towards home ownership. He explained that while interest rates are indeed at an all-time low, rising prices and lack of supply make it a struggle for some.

‘First time buyers are especially missing out in today’s market due to a dwindling supply of housing for sale and shortage of suitable homes. The Help to Buy equity loan scheme has made some headway in addressing this freefall by offering a loan of up to 20% of the property price. From its launch in April 2013 until the end of 2015, the data shows that the majority are taking the maximum loan available. The typical borrower under the scheme has borrowed a fifth of a £220,825 property value, the maximum loan available to them,’ he explained.
‘We are now seeing high numbers of those using Help to Buy also relying on a gifted deposit for the upfront cash required. Our own data showed that 47% of Help to Buy properties were purchased with a gifted deposit last year. Affordability issues are at the core of the struggle to get on the housing ladder, especially in areas with high demand where the average price of new dwellings is rocketing,’ he added.

Patrick Bamford, director of Mortgage Insurance Europe for mortgage insurer Genworth, also has concerns. ‘Since its inception in 2013, the Help to Buy mortgage guarantee has helped to boost high loan to value (LTV) lending particularly among first time buyers, who have accounted for 79% of loans,’ he said.

‘Yet it is concerning to see the number of loans fall by 12% year on year at a time when it should be in its prime. Add to this the fact overall lending at 95% LTV has also fallen and it appears very unlikely that high LTV lending will continue unabated when the scheme finishes at the end of 2016,’ he explained.
‘High LTV lending is critical for supporting first time buyers, who in turn are crucial to the health of the UK housing market. A significant drop in the number of first time buyers would have huge social and economic ramifications. Any further decline in 95% LTV lending adds to the many challenges hopeful first time buyers already face: a lack of housing supply, rising prices, larger deposit requirements and stagnating wages,’ he pointed out.
‘Government intervention has proved that mortgage insurance is an effective tool at supporting first time buyers but what the UK needs now is a long term solution to sustain high LTV lending. Wider use of mortgage insurance supported by the private sector would serve the dual aim of supporting home ownership, the government’s stated goal, while promoting safe underwriting standards and maintaining financial stability,’ he added.