The government’s decision to end the Help to Buy scheme in October has been branded “disgraceful” by the former Conservative party leader, Sir Iain Duncan Smith.

The backbench MP voiced his concerns over the weekend after it was revealed that the Help to Buy property subsidy scheme is to close for applications five months early.

The news will come as major blow to thousands of first-time buyers eager to get a foot on the housing ladder.

According to official data provided by the government, the loan scheme has handed out an estimated £22bn of taxpayer funds since it was launched by former chancellor George Osborne in 2013.

Housebuilders were recently told by Homes England that the programme would shut this autumn rather than at the end of next March.

However, it is claimed by The Telegraph that Homes England assistant director Kasia Locherty ordered developers not to tell the public about the changes. Any communications should be handled by the quango itself, Locherty is claimed to have said.

An industry source told The Telegraph: “We were surprised and disappointed to be put in the position where we’re not allowed to tell customers in good time of its withdrawal.

“This is such a popular policy of the government – and it’s making the Treasury millions as well. They don’t seem to have thought through how upset young couples and families are going to be when they realise, at the last minute, that their first step on the housing ladder just got higher.”

Homes England has now updated its website to reflect the 31 October deadline. The quango is expected to promote the closure timetable on its social media channels in the coming weeks.

The final applications for loans will be accepted in October, with all of them to be processed over the following five months.

Reflecting on the decision to end the scheme, Sir Iain Duncan Smith, commented: “Government has trumpeted its successful outcomes and now turns a blind eye over an early closure. [It’s] hardly the action of a government wanting to bring home ownership to all.”

Kevin Hollinrake, Conservative MP for Thirsk and Malton, and co-founder of Hunters Estate Agents, said he was not in favour of the Help to Buy scheme because it targeted new build houses. But he branded Home England’s move to end the scheme early as “extraordinary”.

Hollinrake told the press: “If they are ending something early that was supposed to run until March – that is clearly wrong. This stuff should be done in a coordinated fashion, not in a piecemeal way. It should be done in accordance with government policy and government timelines.”