As spring finally blossoms in the mortgage world, the new homes market is one area that does not need to be dragged out of winter hibernation. In fact, it never once held back during the shorter daylight months.
According to our figures, new purchasers put in record numbers of Help to Buy applications in February, and January saw a 30 per cent higher application number than the previous year.
This all bodes well for the year ahead, demonstrating the resilience of the sector and the popularity of this key government housing initiative.
That said, with now less than three years until the product’s closure date in March 2021, housebuilders are still none the wiser as to the government’s intentions.
This timeframe is making it difficult for developers to plan ahead, given it can take up to five years or more from buying a large site to getting the first spade in the ground.
Recent annual reports from two of the top three national housebuilders show how reliant the industry is on Help to Buy for its house sales: Taylor Wimpey reported it being 43 per cent of all sales, while Persimmon Homes reported it at 47 per cent. Savills Research found that one in eight of all mortgaged first-time buyers last year came via Help to Buy.
There can be no serious letup with the scheme if the Prime Minister is to achieve her government’s target of 300,000 new homes each year by the mid-2020s.
Overall, housebuilders have done a sterling job so far, adding 217,000 net additions in the year to April 2017 – the third highest number since the early 1970s and up 74 per cent in the past four years. Spare a thought too for Scotland, as its version of Help to Buy – capped at £200,000 – closes next March.
As yet, the Scottish government’s intentions are not public, though indications from industry sources suggest positive news can be expected soon.
Meanwhile, with Help to Buy having launched five years ago in England, the first borrowers will soon be receiving notification of the monthly interest payments due, following the interest-free period.
Some 14,000 homeowners bought using Help to Buy in 2013, so there is a big opportunity for brokers to re-engage with these clients and see whether a remortgage might be appropriate to redeem or staircase the government loan, subject to affordability and equity considerations.
Lenders’ products and criteria in this space are improving, and 90 per cent loan-to-values are available to assist full redemption of the equity loan.
Another plank of the government’s drive to build more homes rests with housing associations, which in the year to 2017 increased completions by 14 per cent.
The targets originally given for the government’s Shared Ownership and Affordable Homes Programme 2016-2021 look high two years in – 135,000 starts on site by 2021. Now badged as Help to Buy Shared Ownership, the figures are at least going in the right direction.
But one issue with shared ownership is that, despite the product being some 30 years old, buyers do not quite get it. Many experts believe trailing it under the social housing banner has damaged its reputation.
Housing associations are now far more commercial than they used to be, so buyers no longer feel they are buying from the local council but buying a new home, the same as anyone else. The advertising too has stepped up a pace and it can now be hard to differentiate between private and housing association-led sites.
That is where the National Housing Federation has begun some work. It wants to look at how a rebrand of the product might help more people identify that this is another affordable route to full homeownership.
On many sites, the product is well over-subscribed, so the message is getting through, but there is still some work to do. Perhaps there are lessons to be learnt from the marketing of Help to Buy, which, from a rather slow beginning, saw huge promotion and awareness within two years.
James Chidgey is new homes relationship manager at Mortgage Advice Bureau