As the number of people using the Help to Buy scheme continues to grow year-on-year, so does the demand for new housing
With Help to Buy having celebrated its fifth birthday this year, we are still seeing strong progress within the new build sector. So, how far have we come since the scheme was first introduced in 2013, where does the new build market currently stand, and what do we need to achieve next?
Data from the Home Builders Federation shows 351,169 planning permissions were granted in England last year – a 21 per cent increase on the previous year and the highest since 2006. The record number of permissions is a clear demonstration of the industry’s commitment to ramping up housing supply.
There is increasing competition and choice for consumers within the new build sector, and this comes from a variety of building societies, specialist lenders, challenger banks and high-street players operating within the space.
Lending criteria are being opened up too, with more than 25 names happy to lend up to 90 per cent LTV on new build houses. That said, there is still a little way to go in extending affordability to first-time buyers further, with only nine lenders willing to lend up to 95 per cent LTV.
The impact of Help to Buy
Since its launch in April 2013 through to the end of March 2018, some 169,102 Help to Buy completions have taken place, providing more than £8.9bn of loans to first-time buyers. So far, it has helped 81 per cent of first-time buyers on to the property ladder and has accounted for approximately 20 per cent of new build sales.
With the average equity loan at £52,000, the scheme has been fundamental in providing additional funding to first-time buyers who may otherwise have been unable to step on to the property ladder.
Recent research we undertook found the Bank of Mum and Dad alone will assist 27 per cent of homebuyers with their deposits this year, providing an average contribution of £18,000. This further highlights the challenges homebuyers face with raising a deposit, reaffirming the importance of Help to Buy.
While these figures are all encouraging, our work here is far from done. The government is aiming for 300,000 new homes to be built per year by the mid-2020s, yet it recently confirmed net additional stock in 2017 was at 217,000.
One key factor in achieving this target is the future of Help to Buy. Although funding has been extended until 2021, we need confirmation after this date. The number of first-time buyers relying on the scheme continues to rise year-on-year and the additional demand created by it helps developers in their aim to reach the government’s target.
With the scheme now five years old, the first wave of Help to Buy homeowners are also beginning to make interest payments on these loans, and many face the prospect of having to remortgage soon. However, choice remains limited; only eight lenders currently occupy the Help to Buy remortgage space. We need to encourage more to enter over the coming year.
The remortgaging process will also mean that these borrowers will require advice. Brokers have a great opportunity to reconnect with clients to assess whether their needs and circumstances have changed and if there are other options that would suit them better, such as staircasing or paying off the loan in full.
The new build sector has come a long way over the past few years, particularly since the launch of Help to Buy. In fact, the scheme is now so embedded within the new build sector it feels like we simply cannot have one without the other.
While there are hurdles ahead, this sector has the capacity to reshape the nature of our housing market, provided it gets the continued support and investment it needs. We should feel proud of our achievements to date and optimistic about what is in store for the future.
Craig Hall is new build manager at Legal & General Mortgage Club