Ryan Bembridge analyses the plethora of schemes aimed at first-time buyers entering and leaving the dysfunctional mortgage market
Equity loan scheme
Whilst he thinks Help to Buy 2 will end without a fuss Duncombe is more worried about the end of Help to Buy 1, or the Help to Buy Equity Loan Scheme.
This scheme, which offers an interest free loan of 20% on new build purchase prices, was launched in April 2013. It was originally set to end in April this year but has been extended to run until 2021.
“The equity loan scheme is going to be harder to replace but its extension should give builders confidence. That needs planning nearer the time,” Duncombe adds.
“However how affordability is assessed needs to be looked at. Even if someone has been renting for five years at £1,000 a month they might not be able to get a mortgage at £700 because of stringent affordability requirements.
“If lenders could be more flexible with affordability that could offset the need for the equity loan scheme though currently they have to work within regulatory rules.”
Property analyst Kate Faulkner agrees that tweaking affordability requirements could help counteract the loss of the scheme. “There needs to be an honest conversation about affordability,” she says.
“The truth is house prices and wages are different today as measures of affordability from what they were 15 years ago.
“With the market leaning on the equity loan scheme longer than expected, one question is whether this government support could be made permanent.
Jeremy Leaf, a former RICS chairman and north London estate agent, is open to it. “The Help to Buy equity loan scheme could be made permanent to assist those first-time buyers unable to raise a sufficient deposit and at the same time take advantage of reasonable mortgage criteria,” he says.
“However, once again at least equal and equivalent help should be provided to increase housing supply so that developers don’t continue to regard the scheme more as ‘Help to Sell’.”
Williams has mixed feelings about the idea. “We would have a permanently state-regulated housing market,” he sums up. “The downside is money being put in housing market would go up and down which in itself brings instability.”
Ray Boulger, senior technical director at John Charcol, adds: “The government should only be this involved in the housing market to deal with market failure.
“Since the number of new homes being built has been below the target for so long there is an argument we are dealing with a housing market failure.”
