The Government has confirmed that the Help to Buy mortgage guarantee scheme will close to new loans on 31 December 2016, as previously advertised.

The scheme was introduced in 2013 to increase the availability of high loan to value mortgages. According to the Government, confidence has now returned to the market with an increasing number of lenders offering 90-95% loans outside the scheme. The government will continue offer the highly popular Help to Buy equity loan and ISA schemes.

In a letter to the Bank of England on 29th September,  the Chancellor Philip Hammond confirmed the scheme would not be extended.

Paul Smee, Council of Mortgage Lenders Director General, said: “Help to Buy continues to give a welcome leg-up to many creditworthy buyers who may not otherwise have been able to get a foothold on the property ladder. The scheme has helped buyers right across the country, including a high proportion of younger borrowers and first-time buyers. Mortgages for those with small deposits are now becoming more common outside the scheme and Help to Buy has been a significant help for buyers when they were less readily available.”

Stewart Baseley, executive chairman of the Home Builders Federation, said: “Help to Buy continues to drive demand for new build homes by making home ownership more affordable and realistic. Its success is directly leading to more homes being built as it provides the confidence developers need to invest in the land and people required to increase their output.”

Richard Sexton, Director at e.surv comments: “To date, the government has demonstrated enthusiasm in its appetite to support the housing market. This U-turn by the Chancellor begs the question of whether a change of emphasis is afoot.  A fluid housing market is key to the overall health of the economy, and supporting first time buyers onto the property ladder is critical to achieving that.   

The early success of the scheme led many high street lenders to include higher LTV products in their offerings. With this in mind, the withdrawal of Help to Buy may not have a dramatic an impact on the market.  However, lenders who made plans to include the scheme as part of their product range may now have to revise their strategies.

 

It will be interesting to see how this move affects transaction levels over the coming months, and how lenders and borrowers alike react to the change. While the housing market is certainly on the road to recovery, we are not out of the woods yet, and the industry and the government need to work together to ensure the market remains accessible to those looking to take their first steps onto the ladder.”