With more lenders operating in various Help to Buy schemes, we must get to know the range of products inside out
The start of 2016 has seen some distinct changes in the Government product we know as Help to Buy.
As more lenders support the product range, mortgage intermediaries must step up to the challenge of advising clients on which one is right for them. With different lenders operating in different schemes, this challenge has never been greater. As such, we need to invest time in making sure we know these products inside out.
A capital plan
Help to Buy London, which on the face of it looks as if it could make a real difference for first-time buyers in the capital, launched on 1 February with a number of lenders already out in support of it. The Chancellor says it has been developed in recognition of the higher cost of housing in the capital compared to other parts of the UK.
Indeed, under the original Help to Buy equity loan scheme, London boroughs accounted for only 5.6 per cent of all completions up to the end of 2015. However, with a whopping 40 per cent equity loan in recognition of the higher housing costs in the capital, we expect these numbers to rise. Aspiring homeowners will now require only a 55 per cent loan-to-value mortgage, not 75 per cent, thereby making the purchase commitment more affordable and benefiting from lenders’ lower interest rates too. What is more, this loan remains interest-free for the first five years.
Even a northerner like me acknowledges that the maximum purchase price cap of £600,000 is relatively low for the capital, but you can see where the Chancellor has set his sights. Combine this with the change in stamp duty for buy-to-let investors and it is clear where the focus for the Government lies.
Move north and over the border and we have a different story. Scotland arguably has a greater need for increased Help to Buy stimulus but its scheme has lacked funding for some time.
Last week it was announced that £195m was to be injected into the scheme by the Scottish government. However, the equity loan is to be reduced from 20 per cent to 15 per cent, the hope being that this will extend funding for a further three years.
To further help achieve this, a tapering of the maximum purchase price has also been introduced. In 2016/17 the maximum value is £230,000, reducing to £200,000 in 2017/18 and £175,000 in 2018/19. The previous maximum value of a new-build home eligible for the scheme was £400,000 – already £200,000 lower than under the English scheme. No doubt this is a welcome boost for consumers but I question whether the funds will last three years.
The Help to Buy policy has come in for a fair amount of criticism in the past, with some saying it simply increased demand rather than supply. However, the schemes have resulted in a 60 per cent rise in the number of first-time buyers across the UK.
There are, of course, other schemes in the Help to Buy stable for those looking to save, including shared ownership, armed forces and the Help to Buy Isa.
Our role as intermediaries is to get these products out into the customer domain. But do not bank on any of them being around until the planned end date.
Andy Frankish is new homes director at Mortgage Advice Bureau