Posts with tag: Help to Buy

Help to Buy shows no signs of slowing down, particularly in London

Published On: December 3, 2019 at 9:57 am

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Help to Buy shows no signs of slowing down, particularly in London

The total value of properties bought using the Government’s Help to Buy scheme exceeded £60bn in the second quarter of 2019. The amount of Help to Buy properties purchased has increased year-on-year, since the scheme first began in 2013 and shows no sign of slowing down.

In 2013, 14,023 completed transactions were recorded, whilst in 2018, this number reached over 52,000. The latest figures for 2019 show that the year is on track to reach similar or higher figures, with 25,275 completed transactions just in the first half of the year. The majority of these sales were to first-time buyers, but the number of buyers already on the property ladder has gradually climbed too.

This increased growth is to be expected as Help to Buy becomes more well known, but the Government is planning to replace the scheme in March 2021 with something that is only available to first-time buyers.

Andrew Southern, chairman of property development company, Southern Grove says:

“Almost a quarter of a million homes have now been purchased since Help to Buy was launched six years ago. And the feeding frenzy at the Help to Buy table shows no signs of slowing down.

“However, looming large over the frenetic activity is the March 2021 cut-off, when the scheme is replaced with one which will only be available to first-time buyers and will set regional property price caps.

“This deadline is likely to inject even more urgency into the market. And first-time buyers, unperturbed by Brexit uncertainty, are already showing increased eagerness to make the most of these equity loans while they can, with the number of purchases using Help to Buy growing 8% year-on-year.”

In 2016, the maximum equity loan was increased from 20% to 40% in London, bringing with it a spike of first-time buyers using Help to Buy in the city. In 2019, of the 15,623 completed Help to Buy transactions in London, 95% were to first-time buyers.

Andrew Southern believes that this highlights the difficulty of getting onto the property ladder in the capital:

“Demand has been particularly strong in London with properties bought by first-time buyers using the scheme increasing by more than a quarter compared to last year.

“It is notable, however, that 75% of purchases are made using the full 40% equity loan, emphasising the challenge of buying a property in the capital with its high prices.”

Help to Buy is Dying in London, New Report Shows

Published On: March 13, 2019 at 10:48 am

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The Government’s Help to Buy scheme appears to be dying in London, according to a new report from Project Etopia.

The modular homes provider has found that the number of properties available in the capital under Help to Buy has plummeted by 64.3% since 2017.

First time buyers sprang into action when the Government’s housing scheme was first launched in 2013, making the most of the equity loan, which, in the capital, covers up to 40% of the cost of a new build home worth up to £600,000.

However, homes available under the scheme are swiftly disappearing. The number of properties for sale under Help to Buy in London has dropped to 1,619, from 4,535 in December 2017. Houses available under the scheme have also been vanishing at an alarming rate; at the end of 2017, Help to Buy houses were extinct in a quarter of all boroughs, but that has now risen to nearly half (15 boroughs).

The borough worst affected by a shortage of Help to Buy homes is Hammersmith & Fulham, where, at the time of the study, there was just one property left – a £595,000 one-bedroom flat.

Among the boroughs with the lowest number of Help to Buy homes available, Kensington and Chelsea has three, while Westminster has four.

Housebuilding statistics appear to show that the Help to Buy drought is purely due to developers not being able to keep up with demand. The number of homes completed in London by private developers remained stable in the past 12 months, at 17,430. This was only marginally down on the 17,770 completions in the previous year.

Over the same period, the amount of homes purchased in the capital under Help to Buy rose by 23.7%, to 5,156.

In total, 20 of the 32 London boroughs have fewer than 50 Help to Buy homes for sale, compared to seven in 2017. Houses make up just 5.4% of the overall stock across the capital, declining form 13.3% of all Help to Buy properties in December 2017.

Joseph Daniels, the CEO of Project Etopia, says: “It’s all very well giving buyers a leg-up, but it’s no good if the properties aren’t there in the first place.Building rates in the capital are relatively stable, but the popularity of Help to Buy is surging, and developers just cannot keep up with demand.

“The gradual extinction of Help to Buy homes in London demonstrates that interest-free Government loans are not the answer to the housing crisis. Only rapid housebuilding on a large scale and innovative ideas, including modular construction, will prove to be a lasting antidote.”

He adds: “Families are being particularly hard hit, with houses available under Help to Buy now extinct in half of London boroughs, pushing overwhelming demand into other boroughs or forcing people out of the capital altogether.”

First Time Buyers Make Up Majority of Help to Buy Purchasers

Published On: December 3, 2018 at 10:56 am

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Statistics from the Government’s Help to Buy (Equity Loan scheme) Data to 30th June 2018, England document has revealed a 15% year-on-year increase in the number of those in England using the scheme.

The document highlights that since the scheme was launched (1st April 2013) to 30th June 2018, 183,947 properties have been purchased with an equity loan. The total value of these loans is £9.90 billion, with the value of the properties sold under the scheme amounting to £46.52 billion.

The Government has also pointed out that 81% of the total purchases were made by first time buyers. In London, the maximum equity loan was increased from 20% to 40% from February 2016. Since that time to 30th June 2018, there have been 9,470 completions in London, and 7,885 of which were made with an equity loan higher than 20%.

Lucy Pendleton, founder director of independent estate agents James Pendleton, has commented: “Those looking for some clues as to what is propping up house prices across the country need look no further. First time buyers are piling into Help to Buy and they don’t seem to give two hoots about the Brexit uncertainty that is holding back the rest of the market.

“First-time buyers, still under huge financial pressure despite relatively low borrowing rates, still account for the lion’s share of these loans and their appetite isn’t waning. They have taken 16% more Help to Buy loans nationally in the past year and in London they are literally hoovering them up.

“It’s here they are putting the scheme to particularly good use because house prices are still relatively high despite the fact they are cooling. That’s not that surprising but the scale of the increase certainly is, with first time buyers’ use of the scheme ballooning a massive 32% in the capital.

“Transaction levels nationally remain depressed but hunger for Help to Buy shows no sign of abating with the scheme helping first time buyers buy £5.8 billion worth of property in the first half of 2018.”

Shaun Church, Director at Private Finance, has said: “The Help to Buy scheme has undoubtedly been a much-needed helping hand for many first time buyers struggling with high housing costs. Approvals have continued to grow year-on-year, suggesting there is still strong demand for options onto the housing ladder, which don’t require a hefty deposit.

“Londoners have strongly benefited from the maximum equity loan doubling in size, with 83% of all completions using the scheme in the capital being made with a loan of more than 20% in Q2. This is some compensation for the fact that Londoners do not stand to benefit as much from recent cuts to stamp duty for first-time buyers, given only properties under ￡300,000 are fully exempt.

“Though Help to Buy is a valuable route to homeownership, where possible it is best to exit the scheme once the five-year interest-free grace period is over or sooner if this is viable. As Help to Buy caters to a more niche market, the rates available on more traditional mortgage products are generally more competitive. Help to Buy borrowers are also expected to pay 10-20% back of the current value of their home rather than the original equity loan, so exiting the scheme enables them to enjoy more of the capital gains from their property should their home rise in value.”

Craig Hall, Head of Broker Relationships and Propositions, Legal & General Mortgage Club, has commented: “With its largest quarter to date, today’s figures show the vital role Help to Buy continues to play in the market.

“Not only has the scheme enabled builders to deliver more homes, with an increased supply of 78% in the last five years, but it is consistently supporting the buyers who need it most – 81% of those who use it are first time buyers.

“Given the quarter on quarter increases we have been seeing, it is likely we have reached the 200,000 mark by now.  It’s good news that the scheme has now been extended beyond 2021, however, we still need to look at what will happen post 2023.

“Whether it’s through an increase uptake of Shared Ownership, lenders offering higher loan-to-values (LTVs), Starter Homes, the Bank of Mum and Dad or intergenerational mortgages, we need to focus our attention on what the plan for the future is now if we are to prepare for the scheme’s end.”

Are Developers Pushing Up House Prices through Help to Buy?

Published On: November 26, 2018 at 9:57 am

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Young first time buyers looking to get onto the property ladder can now do so two years earlier than before, thanks to additional support from Help to Buy schemes, according to new research from Compare My Move. However, are developers actually pushing up house prices by taking advantage of the schemes?

Compare My Move found that it takes young first time buyers in the UK an average of 12 months to save the 5% deposit needed to take advantage of the Help to Buy Equity Loan scheme, while renting a property from a private landlord. This compares to the three years that it would take to save the necessary 15% deposit required if not using the Help to Buy scheme.

As a result, it would save first time buyers more than £10,000 to use the Equity Loan scheme.

However, this is a growing level of discontent with the Help to Buy scheme, as developers have been accused of selling new build homes to first time buyers at hugely inflated prices.

New data, compiled by reallymoving.com, shows that homes being sold under the Government’s Help to Buy scheme are routinely overpriced, by almost 10%.

Many experts believe that property firms are trying to cash in, as they know that first time buyers who use Help to Buy can borrow much more money, which is why a growing number of people are now opposed to the scheme.

The findings reflect another study by property investment platform British Pearl, which found that 31.5% of Britons do not support Help to Buy, with many believing that it has actually made housing less affordable.

Surprisingly, millennials were the least likely to support the scheme, which was set up specifically to benefit this group of buyers.

So, although young first time buyers can now get onto the property ladder an average of two years earlier through Help to Buy, is it actually benefitting the market at large?

In his Autumn Budget, the Chancellor announced an extension of the scheme to 2023.

Millennials are Less Likely to Support the Help to Buy Scheme

Published On: November 23, 2018 at 10:29 am

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Millennials are some of the least likely Britons to support the Help to Buy scheme, amid concerns that it is pushing house prices up, according to a poll by property investment platform British Pearl.

The survey of more than 2,000 Brits found that 31.5% did not support the Help to Buy scheme, which is designed to help first time buyers get onto the property ladder, with many believing that it has actually made housing less affordable.

Of the third who were opposed to the Help to Buy scheme, 37.5% blamed it for house price inflation, while 35.8% argued that the Government should instead use cash “to build more homes”.

More than a quarter (26%) of those who disagreed with Help to Buy claimed: “It’s unnecessary and those who can’t afford to buy should rent”, while 24.3% believed: “The Government shouldn’t interfere in the market.”

Millennials are Less Likely to Support the Help to Buy Scheme

Millennials are Less Likely to Support the Help to Buy Scheme

The poll found that millennials were among the least likely to be in favour of the Help to Buy scheme, while older respondents were actually more likely to support it.

Just 59.8% of 16-24-years-old supported the scheme, along with 66.7% of 25-34-year-olds. However, 70.1% of 45-54-year-olds did, as well as 73.1% of the over-55s.

The responses show that, generally, the younger someone is, the less likely they are to trust the Help to Buy scheme, suggesting that one of the main demographics that Help to Buy is supposed to appeal to are the least likely to feel that it would benefit them.

The research also revealed that people in Norwich were the least likely to be in favour of the scheme, with just over half (55.1%) supporting it. However, in Bristol, more than three-quarters (75.9%) said that they did support Help to Buy.

Income also affected people’s perception of the scheme, with those earning between £35,001-£45,000 being the most likely to support it (74.3%), while those taking home between £65,001-£75,000 being the least likely (60.9%).

Since the first phase of the Help to Buy scheme was introduced in April 2013, the average UK house price has soared by 36.7%, from £170,335 to £232,797 in August this year.

Experts have argued that the scheme has caused prices to become inflated, amid intensified competition from buyers who have more cash to spend.

James Newbery, the Investment Manager at British Pearl, responds to the findings: “While there were certainly good intentions behind Help to Buy, and it has helped people onto the ladder, our poll proves a significant portion of Brits are still to be sold on the scheme.

“Its merits are either not being communicated effectively enough to generation rent, or people are beginning to believe the scheme has become part of the problem, rather than the solution.”

He believes: “Public opinion is becoming jaded by a persistent lack of stock and ever-increasing property prices, so something clearly needs to be done to address Britain’s housing crisis and the country’s perception of how the Government is handling it.

“Millennials — who form part of the key demographic Help to Buy was designed to give a leg-up to — clearly still have a bone to pick with what’s been laid on the table for them in terms of housing options.”

Newbery adds: “The digital revolution has benefited those with the cash to spend, by offering them unitised ownership and, in turn, increasingly diversified portfolios. Yet it is young people who people who feel more disconnected from property than ever, as platforms like British Pearl attempt to bridge that divide.”

It may be disappointing for those stuck in rental housing to learn, therefore, that the Help to Buy scheme has been extended until 2023 by the Government.

IMLA Calls for Clarity Around the Future of the Help to Buy Scheme

Published On: October 15, 2018 at 10:54 am

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Buy-to-Let Remains a solid investment option, Broker Insists

The Intermediary Mortgage Lenders Association (IMLA) is urging the Government to provide much-needed clarity around the future of the Help to Buy equity loan scheme, to prevent destabilisation of the housing market and preserve the ability to offer financing to first time buyers.

The IMLA, which represents the large majority of first time buyer loan underwriters in the UK, notes that the scheme has been well supported by its members and has had significant success in contributing to key Government targets, such as helping more first time buyers onto the housing ladder since Help to Buy was introduced in 2013.

To date, the Help to Buy equity loan scheme has resulted in almost 170,000 new homes being built and sold in England – 81% of which were to first time buyers. Furthermore, it is estimated that almost half (43%) of these buyers would not have been able to purchase their homes without Help to Buy assistance.

The IMLA believes that this has been a major contributor to restoring UK-wide first time buyer lending to pre-crisis levels, with mortgage approvals to the group up by more than a third (34%) since the scheme began.

The organisation recognises that the Government may wish to review the current scope of the scheme and possibly make some adjustments, but warns against a policy cliff-edge that would leave many first time buyers unable to secure a mortgage. With the support of Help to Buy, mortgage lenders have been able to offer loans to younger borrowers, who otherwise would not have been able to secure funding for a new build home under existing prudential lending criteria.

In September, the IMLA outlined all of its concerns in a letter to the Chancellor, Philip Hammond. It was hoped that an announcement might be made at the recent Conservative Party Conference, and the IMLA was pleased to note the positive reference to Help to Buy made the Chancellor in his speech.

Kate Davies, the Executive Director at the IMLA, says: “We are concerned that funding for Help to Buy is due to be withdrawn in 2021, and that there has, as yet, been no clear signal as to what, if anything, might replace it.

“Given its success – and its importance in boosting both homeownership and housing supply – we believe that some form of Government support should continue.”

She continues: “Lenders and borrowers place heavy reliance on the scheme, and a major step-change to arrangements would risk significant market disruption and potentially undermine the Government’s ambitious targets for new housing supply.

“If changes to the scheme are being proposed, lenders will need appropriate notice in order to plan ahead and deliver positive outcomes – hence our wish to have clarity as soon as possible on the Government’s intentions.”

Davies adds: “We look forward to hearing the Government’s plans and to working closely to continue the development of what has become a key element of housing policy.”

Do you believe that the Help to Buy scheme is essential in boosting homeownership and housing market activity?