Despite the fact that figures show that the vast majority of people using the UK Government’s flagship Help to Buy scheme are first time buyers, it is coming under pressure to be scrapped.
Ministers want to keep it going beyond its current end date of 2021, as do many lenders, but there are an increasing number of voices calling for it to be scrapped as it helps people who don’t really need the help.
Official figures show that more than 420,000 people in Britain have been helped onto the housing ladder with Help to Buy and 365,400 were first time buyers. In the 12 months to March 2018 80% of loans were to first time buyers and their share of the scheme has continued to trend upwards.
It has also been criticise for helping too many buyers in London, but again the figures show that 10% more went to buyers in the North of England and 9% more to buyers in the East Midlands.
Lenders want to see a commitment from the Government to continue with the scheme. Robert Gardner, chief economist of the Nationwide, pointed out that Help to Buy has been a key source of demand for newly built homes in recent years.
‘It is unclear how much Help to Buy activity represents additional demand and how much has simply replaced activity that would already have taken place. The scheme has, however, been a key source of demand and has accounted for 37% of new build completions in England in the last 12 months,’ he said.
‘This is even higher in some regions, such as the North West, where Help to Buy accounted for nearly half of new build purchases. It is unclear whether or not the scheme will be extended, or amended, beyond April 2021, when it is due to expire,’ he explained.
‘However, given the long lead time on many housing developments and the political consensus on the need to increase housing supply, it suggests that the scheme will not come to an abrupt end,’ he added.
However, Sam Dumitriu, head of research as the Adam Smith Institute, believes that it does not address the fundamental problems in the housing market, such as a shortage of supply and professor Danny Dorling, an Oxford University housing expert, has argued that it is keeping house prices artificially high.
Whatever happens, the scheme is unlikely to suddenly end in April 2021 as that would be regarded as having too much of a shock to a fragile and challenging housing market. A temporary extension could be announced but analysts might want to see how Brexit affects the property market first.
