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Should Help to Buy be extended to support the housing market?

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Written by: Samantha Partington
15/04/2020
The Government is in talks with housebuilders to extend the Help to Buy scheme, which is due to be restricted to just first-time buyers from April 2021
Should Help to Buy be extended to support the housing market?

The Home Builders Federation (HBF) is in talks with the government about extending the Help to Buy scheme, Stamp Duty holidays and setting a date for the house building industry to get back to work.

The Help to Buy scheme is open to any buyer of a new-build home. It aims to help struggling buyers onto the property ladder by offering loans of up to 20% of the property’s value (up to 40% in London) to people with a 5% deposit. They then take out a mortgage for the remaining amount from a participating mortgage lender.

It is due to end in April 2021 and a new version of the scheme will run from April 2021 to March 2023, restricted to first-time buyers only and to houses with a market value up to new regional price caps.

If the original scheme ends when planned, qualifying sales transactions will need to be agreed by December 2020.

However, the housing trade body is proposing that the current version of the Help to Buy scheme be extended to support a speedy recovery of the sector.

While there is no certainty the government will agree to the measures, we understand that it, along with Homes England, have been receptive to the proposals put forward.

By removing this deadline and the requirement for builders to re-register for a new scheme with price caps that is open only to first-time buyers, builders said it would give the industry more time to recover.

Speaking to The Times, John Tutte, chairman of housebuilder Redrow, said: “It makes sense for the government to extend the [Help to Buy] deadlines by 12 months. I think that will become quite important because we don’t know where the mortgage market is going to come back to.”

Craig McKinlay, new business director at Kensington Mortgages, said: “A potential extension of the Help to Buy scheme makes complete sense at this time. Builder and consumer confidence could struggle post-lockdown and this will certainly boost both.

“Construction jobs are not just vital to the housing market, but our economy too, and maintaining these is crucial to keep it running and helping us recover. In our current world of uncertainty, any certainty is extremely welcome.”

Stamp Duty holiday

The trade body has also tabled the implementation of a Stamp Duty holiday to encourage people to buy a property or move home. The Royal Institution of Chartered Surveyors has also called for a stamp duty freeze for buyers.

The HBF’s immediate focus is helping developers get through the crisis and protecting the industry’s capacity to keep building when the lockdown restrictions are lifted.

As income from house sales dries up during the government’s ban on all but non-essential home moves, valuations cease and solicitors are furloughed, small builders are vulnerable to collapse because they do not sit on large cash reserves to keep them going.

Helping these firms to access government funding to stay afloat during the crisis, said the HBF, is important to maintain a diverse make up of developers when the industry re-opens.

Steve Turner, director of communications at the Home Builders Federation, said: “The impact on the industry has been considerable with a huge drop in income from sales and the cessation of construction work.

“We are working with all parties to support builders through the crisis and coordinate a return to work as soon as it is safe to do so. Ensuring measures are in place that enable a speedy effective and sustained return will allow house building to play a major part in helping the UK economy recover.”

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