The Government’s flagship Help to Buy equity loan which was due to end in April 2021 will be extended to 2023 in England but for first time buyers only, it has been announced.
But the extended scheme will be more restrictive with a regional cap on the amount being introduced based on the predicted average house price for first time buyers in each region of England.
The highest cap will be £600,000 in London and the lowest will be £186,100 in the North East, according to Budget documents published by the Treasury.
It will be £224,400 in the North West, £228,100 in Yorkshire and the Humber, £261,900 in the East Midlands, £255,600 in the West Midlands, £407,400 in the East of England, £437,600 in the South East and £349,000 in the South West.
A similar set of figures are likely to be announced by the devolved Governments in Scotland and Wales in due course.
The announcement has been widely welcomed. Jackie Bennett, director of mortgages at UK Finance, described it as ‘vital support’ for first time buyers. ‘Last year the number of first time buyers reached its highest level in a decade, boosted by vital schemes like Help to Buy. This announcement provides further clarity and will bring welcome certainty to the new build housing and mortgage market,’ she said.
Justin Gaze, head of residential development land at Knight Frank, pointed out that the decision to limit the extended scheme to first time buyers is sensible no industry should be reliant on Government assistance indefinitely.
But he pointed out that the ‘deposit gap’ that the Help to Buy equity loan scheme was established to overcome is still very much a problem. In the UK house prices are 37% higher than when the scheme was introduced in 2013 and the mortgage market for those with only a 5% deposit remains very thin,’ he explained.
‘For prospective buyers, finding the funds for a deposit will remain the biggest barrier to home ownership. From 2023, the onus will move to mortgage lenders and the development community to help buyers bridge this gap,’ he added.
The clarity of the future of the scheme was welcomed by Kevin Roberts, director of the Legal & General Mortgage Club. ‘Not only do housebuilders now have more certainty for longer term planning and building the thousands of new homes our country so desperately needs, but it also gives potential buyers who are saving for a deposit the peace of mind that they too can benefit from the scheme over the coming years,’ he said.
However Lucian Cook, head of UK residential research at Savills, warned that the ending of the scheme in 2023 could impact on the number of new homes being built. ‘The big story here is that it will only be extended to 2023. That puts house builders on notice that they will no longer have a Government backed safety net and will have to more forensic about what they deliver and where they build it,’ he said.
‘That has the potential to stall the growth in house building unless we have a package of measures that support more house building across a wider range of tenures,’ he added.