In a fairly subdued housing market, first-time buyers are bucking the trend. The number of new first-time buyer mortgages reached a 12-year high last year, with 370,000 first-time buyer mortgages completed in 2018.
John Phillips (pictured), operations director, Just Mortgages and Spicerhaart
In a fairly subdued housing market, first-time buyers are bucking the trend. The number of new first-time buyer mortgages reached a 12-year high last year, with 370,000 first-time buyer mortgages completed in 2018.
And there could be a whole host of reasons given for this rise – low mortgages rates, low unemployment, wages rising – but one of the big factors at play is incentive schemes, predominantly Help to Buy.
Launched in 2013 to help first-time buyers who are struggling to get into the housing ladder, the Help to Buy scheme is available only for new build homes and sees the
Government lend buyers up to 20% of the cost of their new home. Thanks to the loan – which does not have to be paid back for five years – the buyer only needs a 5% cash deposit and a 75% mortgage to cover the remaining cost.
According to the latest stats released last week, since its launch in April 2013 up until December 2018, 210,964 properties have been purchased using a Help to Buy loan.
In 2018 alone, 52,057 homes were purchased using Help to Buy – that’s more than 1,000 a week. What’s more, Help to Buy loans now account for one in eight first time buyer purchases.
It all sounds great, but there are fears that we have become far too reliant on the scheme to hold up the housing market, and that when it all ends in 2023, things could start going badly wrong.
Critics of the scheme also argue that it has actually been quite damaging to first-time buyers and that by increasing demand for new builds, Help to Buy has inflated house prices, forcing those on the scheme to pay paid more for their new builds than they are actually worth.
I can see that this potentially could be an issue, but it is far outweighed by the number of people this scheme has helped - people who, without it, could never have afforded their own home to do so.
And not only has Help to Buy been good for first time buyers, but it has also really benefitted the house building sector, and I doubt we’re ready for it to go in 2023.
Incentives like this clearly work, and it would be prudent for the government to either extend the scheme further or make it permanent, or if not, come up with another even better incentive, like scrapping stamp duty. The House of Lords think there should be an overhaul of stamp duty, almost three quarters of over 50s think downsizers should be exempt form stamp duty and I think it is stifling the market. Let’s just hope the government listens.
