The government is scrapping its Help to Buy mortgage guarantee scheme in December in what may be seen as cementing a shift away from home ownership.
The announcement yesterday signals the death knell of one of the previous government’s flagship housing policies and reinforces housing minister Gavin Barwell’s statements earlier this month that new homes were needed of all tenures.
He also indicated that the government is considering abandoning its pledge to build 200,000 starter homes by 2020 due to a shift towards supporting the rental sector.
In a letter to Bank of England governor Mark Carney, chancellor Philip Hammond said the Help to Buy scheme had a “specific purpose that has now been successfully achieved”.
Originally launched in late 2013, the scheme meant buyers only needed to raise 5% of the property value for a deposit, with a government guarantee on a further 15% to give mortgage lenders the incentive to loan larger amounts.
However, other components of Help to Buy – the equity loan scheme and the ISA bank account – will continue to operate.
The loan element of the scheme is a five-year, interest-free equity loan available for up to 20% of the property price when a buyer has raised their own 5% for a deposit. However, that scheme is only available for new-build homes, meaning it is linked in some way to housing supply.
The ISA effectively gives people who have saved a deposit additional money and has been criticised for being potentially regressive.
Speaking to CM, Steve Turner from the Home Builders Federation said he was not overly concerned with the news as the organisation’s main concern is with the equity loan element.
“Our major focus and area of concern is the equity loan scheme,” he said. “We’re clearly happy that it will continue for another five years and this is what our members want.”
The chancellor said the scheme has helped more than 86,000 households with an average property price of £157,000.
In terms of its Starter Home initiative, the government campaigned on a policy of building houses which would be sold to first-time buyers at a discount of 20%. However, Barwell said that such policies, which encourage ownership and increase the level of demand, could affect the number of homes built for rent.
