The government is considering introducing a new version of the discontinued Help to Buy scheme as demand for new homes slumps and housebuilding targets drift further out of reach.
Ministers are understood to be exploring a revived equity loan programme to stimulate the stagnant housing market, with the ambition of delivering 1.5m new homes by 2029 now under growing pressure.
Major housebuilders have been lobbying for measures to support buyer demand, arguing that weaker sales are constraining new development. While Downing Street is said to be receptive to the idea – viewing it as a potential lifeline for first-time buyers – Treasury officials remain wary about committing public funds.
So will a subdued spring selling season force the UK government’s Help to Buy hand?
Anthony Codling from RBC Capital said: “They say things come in threes not twos. 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.
“Changes to the supply side take time, but we know that demand stimulus acts much more quickly. Earlier in the year help to buy appeared to be off the table, but will it be back on to kickstart the spring selling season to drive housebuilding forward and help the government meet one of its flagship policies ahead of the local elections in May? If it does, the mainstream housebuilders, especially those with high exposure to the South and South East are likely to be the major winners. Those focused on partnerships [Vistry] and those in London [Berkeley Group] are least likely to benefit.”
Government data relating to the original Help to Buy equity loan scheme shows that in the scheme’s entire period between 1 April 2013 and 31 May 2023, 387,195 properties were purchased with an equity loan, of which 328,346 were bought by first-time buyers. The total value of these equity loans amounts to £24.7bn, and the combined value of the properties sold under the scheme totals £109.2bn.
Help to Buy equity loans were introduced on 1 April 2013, with the initiative running until 31 May 2023 as a means for helping buyers purchase new-build properties. The government would provide, via an equity loan, up to 20% of the value of a property (up to 40% in London from 1 February 2016), repayable when the property would be sold in the future.
In 2020, it was announced that the Help to Buy scheme would change on 1 April 2021, with new eligibility criteria and regional price caps. The previous scheme deadlines initially required properties to be built out by the end of December 2020 and completed by the end of March 2021. However, due to delays caused by the Covid-19 pandemic, an extension was granted until 28 February 2021 for properties to be built out and until 31 May 2021 for legal sale completion.
According to Karen Noye, mortgage expert at Quilter, the scheme enabled a “significant number” of purchases by first-time buyers but its impact was not “uniformly positive”.
She previously said: “Its design, which allowed the government to gain a share of the property’s appreciation, meant that as house prices increased, so did the government’s profit from these loans. This aspect became particularly burdensome for homeowners when they reached the end of their five-year interest-free loan period.
“With the interest rate initially set at 1.75% and then increasing annually based on inflation, many homeowners faced escalating costs, adding financial strain to what was initially an assistance programme.”
Furthermore, Noye added, the scheme also had “significant implications” for housebuilders.
“By increasing demand for new-build homes, the scheme effectively lined the pockets of these developers,” she added. “As more buyers were able to access funds to purchase new homes, builders saw an increase in demand, which likely contributed to the rise in house prices.
“This increase in demand, fuelled by government-backed loans, provided a substantial financial boon to the construction industry. However, this benefit to builders came with the caveat that it may have contributed to inflating house prices, making the market less accessible in the long run.”
Price caps mean new homes get built smaller. Therefore, per sqft. Cost more.
Which is house price inflation.
Boosting demand without supply will simply, once again. Increase house prices. Further exacerbating the problems we have had, effectively since the mid-noughties.
Are forty to fifty year mortgages not enough? When will the open honest reconciliation and discussion happen on this?
Life expectancy and indeed perhaps more pertinently working life expectancy isn’t up by 20 years over the last two decades. Yet the mortgage debt is.
Gov.
The rules of supply and demand stay true. Always.
If you want to grease the wheels of the market. Halve stamp duty rates. Then take a breather.
Reassess after 12months.
But do so alongside some form of further relaxation in the planning system. To get permissions through quicker. Easier.
H2B isn’t the cure.
Liquidity is strained. Stamp is a proven blocker. You don’t have to go all the way. Just halve it.
BUT. Unless there’s an equal force on the supply side. Frankly. You’re just further fubar’ing the market for the next generation.
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We do not need HTB. Also high cost for government. Just need the government to indemnify the top 5-10% of 100% mortgages. Cost = £0. Allows FTB’s with good earnings and good credit to be able to buy a property rather than rent and gets the market moving from the bottom up. Not just the new homes market which doesn’t help anyone except the developers.
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Thoroughly agree with not restricting solely to brand new homes.
That was always absolutely nuts.
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Help To Buy does help move the market, but only if it is available for the entire market. 20 years ago, I used it to buy my first place. 10 years after that, I sold it and had enough equity to purchase my current home with a £10k deposit, so it does work.
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This is absolutely a necessity
Build costs have gone through the roof and many small to medium sized house builders are sailing very close to the wind if not going bust.
It’s not true to say help to buy cost taxpayer in fact if you do your research you will find it’s been an extremely good deal both in terms of interest payments and capital growth.
It’s a no brainer
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It has been a right money-spinner for the government because prices increased massively after 2013.
Today however, with property prices staying relatively static for a couple of years, providing a new equity loan at 0% interest for 5 years makes ZERO financial sense when the BoE base rate is as high as it is.
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Supply & Demand, as has been mentioned above.
The housing market is totally skewed and out of proportion – all to the benefit of some very wealthy land owners who have guided us into this position.
CIL payments are ridiculously low – apparently because developers wouldn’t do it if they were higher. Poppycock!! What would happen is that land values would go down a bit.
The number of properties built is far too low – apparently because it’s too hard to get permission to build. Also poppycock. It’s difficult to get stupid over-dense permission with zero CIL, but relatively easy to get permission for a sensible development where it’s needed when designed properly!
Stop taking the mikey! The housing market doesn’t need an injection – it needs sorting out with some sensible, consistent policy from central government…
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you know diddly squat about house developing
But H2B distorts the market not needed
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“you know diddly squat about house developing”
You might be right, but then again, perhaps not…
Developers work within “the system”. The system has quietly morphed over the years into something that favours landowners. I’m not talking about the cost of materials or labour, they are what they are.
Instead, I’m talking about the underlying economics of buying land to build new homes.
That process has been quietly tweaked and guided to be super profitable to some people who haven’t actually worked for it.
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‘…this benefit to builders came with the caveat that it may have contributed to inflating house prices’ Who’s have thought it! Persimmon springs to mind.
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