The UK government is exploring the reintroduction of a Help to Buy-style equity loan scheme as new home sales decline and the target of delivering 1.5 million new homes by 2029 faces mounting challenges.
Ministers are examining options to revive the programme, which ended in May 2023, according to sources familiar with the discussions. Major housebuilders have been pressing for demand-side interventions, arguing that reduced sales volumes are constraining their ability to commence new developments.
While Downing Street is reportedly open to the proposal, Treasury officials are said to be cautious about allocating public funds to such a programme.
Previous scheme performance
Government data shows that between 1 April 2013 and 31 May 2023, the original Help to Buy equity loan scheme facilitated 387,195 property purchases, with 328,346 acquired by first-time buyers. The total value of equity loans issued reached £24.7 billion, whilst the combined value of properties sold under the scheme totalled £109.2 billion.
The scheme provided equity loans of up to 20% of a property’s value, rising to 40% in London from February 2016. Loans were interest-free for five years, after which interest was charged at 1.75%, increasing annually with inflation.
In 2021, the scheme was modified to include new eligibility criteria and regional price caps before its eventual closure in May 2023.
Market analysis
Anthony Codling from RBC Capital stated: “The government has worked on planning and addressed social and affordable housing funding, but there is a disconnect between planning and affordable housing funding theory and practice. Subdued spring selling season sales rates may force the UK Government to make a third change to address demand if it wants to get close to its housing targets.”
Codling noted that demand stimulus measures act more quickly than supply-side changes, and suggested that mainstream housebuilders with high exposure to the South and South East would benefit most from any scheme reintroduction. He indicated that partnerships-focused builders and London-centric developers would be less likely to benefit.
Scheme criticism
Karen Noye, mortgage expert at Quilter, previously assessed the scheme’s impact as mixed. She noted that whilst it enabled purchases by first-time buyers, the government’s share of property appreciation became “particularly burdensome for homeowners” after the interest-free period ended, with escalating costs adding “financial strain to what was initially an assistance programme”.
Noye also observed that the scheme had “significant implications” for housebuilders, stating: “By increasing demand for new-build homes, the scheme effectively lined the pockets of these developers.” She suggested that the government-backed increase in demand may have contributed to house price inflation, potentially making the market “less accessible in the long run”.
Outlook
Whether the government proceeds with a new version of Help to Buy may depend on spring market performance and the urgency attached to meeting housing delivery targets ahead of local elections in May. Any decision would need to balance support for first-time buyers and housebuilders against Treasury concerns about public expenditure and potential market distortion effects.
