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Help to Buy: How lenders can prepare for the end of the scheme

Stacey


Stacey Wood, National New Build and Surveying Relationship Manager, Sesame Bankhall Group

Published 15.08.2019

Despite a sluggish housing market, the price of property still increased by 1.2% in the last year1, with the average UK property now valued at £229,431. The average age that people are able to buy their first house has risen too – up from 25 to 33-years-old in the last two decades2. And as people are buying a property later in life, 40% of them have already started a family. It means many of them are eschewing the traditional first-time buyer properties, such as flats, and instead looking to buy bigger properties as their first purchase, with three-bedroom houses the most sought-after properties.

The average deposit now required also increased and now stands at £30,9453. That’s a lot of money for anyone, particularly those who are caught in the ‘rent trap’ where their rental costs are taking up so much of their income that they’re struggling to save cash for a deposit for a home of their own. It’s why the Help to Buy scheme has been so crucial in helping people looking to take their first step on the property ladder. The 20% interest-free equity loan offered as part of Help to Buy has supported more than 210,000 property purchases, 81% of them to first time buyers4, since the launch of the scheme in 2013.

So what happens when Help to Buy comes to an end in 2023? With first time buyers paying an average of £294,920 for a new build property, up from £280,160 at the same point in 20185, I think it’s essential that the industry starts planning now to ensure they can still continue to get the mortgages they want in the future.

With not many lenders offering 85%+ LTV on new build mortgages for first-time buyers, I’d like to see more lenders enter the space and offer higher LTV products. With affordability now one of the key drivers in decision making post-MMR, high LTV lending to the right customer on the right property is something more lenders should be considering.

I’d also like to see more lenders embracing Methods of Modern Construction (MMC) over the coming years. With the government struggling to meet its target of building 300,000 homes a year, these methods, which include timber framed buildings, modular buildings and buildings where components are assembled off-site, could enable new properties to be constructed quickly and efficiently.

It’s why I’m pleased to see Precise Mortgages offering up to 85% LTV across its Residential Mortgages range, as well as considering MMC on properties constructed from an extensive list of approved contractors as long as a warranty is available if the property is less than 10 years old and the valuer is satisfied the property represents suitable security. It’s this sort of progressive, innovative approach to lending that will appeal to first time buyers in the future.

Sources: 1https://www.gov.uk/government/publications/uk-house-price-index-summary-may-2019/uk-house-price-index-summary-may-2019
2https://www.telegraph.co.uk/property/buy/number-young-homeowners-will-halve-2026-four-ways-make-sure/
3https://www.financialreporter.co.uk/mortgages/first-time-buyer-deposits-rise-by-17.html
4https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/798255/HTB_Equity_Loan_statistical_release_Q4_2018.pdf
5https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/820479/Help_To_Buy_Equity_Loan_statistical_release_Q1_2019.pdf


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