Help to Buy isn’t perfect but we would be stuck without it, so there must be a phased withdrawal when the time comes
I dread to imagine where we would be without Help to Buy. It has been a key driver in getting the UK property market up off the canvas in the aftermath of the financial crisis.
Equally, however, it worries me. What will happen when it ends? As such an artificial stimulus, it has become so ingrained in the housing market that stopping the drug too quickly could trigger cardiac arrest.
Yes, there are far more standalone 95 per cent LTV deals out there, but very few lenders are offering such deals on new properties. Take away Help to Buy and that market falls flat on its face.
I am not saying it is perfect. For starters, the government equity loan is enabling borrowers with just a 5 per cent deposit to buy a house potentially 20 per cent above their budget. This is arguably creating a false dawn for the housing market and putting too many people too high up the ladder too quickly, where they are out of their financial depth.
Equally, some borrowers continue to look at Help to Buy as a ‘freebie’ when, of course, it is not. It is an equity loan and, if house prices keep rising, you pay back to the Government more than you borrowed.
That is an issue in itself. The Government is sitting on a paper ‘profit’ on Help to Buy of billions of pounds, meaning it, too, has a vested interest in keeping the housing market going – a major red flag.
And do we really need a maximum purchase price set in stone at £600,000? Surely the people this scheme is aimed at should be first-time buyers, the majority of whom (London aside) will not be buying a property in that price bracket. It should be capped at the average property price by region.
There are still a number of years before Help to Buy is wound up but already I am convinced a phased withdrawal is the only practical option. We need to be weaned off it, rather than forced to go cold turkey.
Alastair McKee is managing director at One 77 Mortgages