According to a story in The Times, Prime Minister Rishi Sunak was considering reintroducing the first-time buyer programme in an effort to assist more people in obtaining a home.
It follows Labour’s election campaign promise to build 300,000 more homes annually.
But a lot of mortgage experts do not support the idea of reviving Help to Buy.
The revelation has been received with a mixture of worry and suspicion, ranging from worries that reintroducing the scheme will increase housing prices to claims that the proposals were simply a “political ploy” by the Tories to garner votes at the election.
This is possibly the dumbest idea the Conservative administration has had since the mini-Budget, according to Lewis Shaw, owner and mortgage broker at Riverside Mortgages.
“Political interference and meddling where none is necessary are to blame for the majority of the issues in the real estate industry.
“They ought to let the market alone to establish its equilibrium and stay the hell out of it. Additionally, helping people find housing has nothing to do with this. Nobody should be duped by it; it’s a sleazy attempt to buy votes, nothing more, nothing less.
Increasing home prices
With the introduction of the Help to Buy: Equity Loan programme in 2013, homebuyers with a 5% deposit could obtain a loan to cover up to 20% (or 40% in London) of the cost of a new construction property. In 2021, it was restricted to first-time buyers only, and in March 2023, it was completely eliminated.
Despite being well-liked by buyers, it was criticised, in part because it raised housing demand and raised home prices at a time when there was a shortage of inventory.
In fact, this was one of the key issues that many mortgage industry insiders had when the plan was revived.
According to Kundan Bhaduri, a portfolio landlord and real estate developer of The Kushman Group, “The Help to Buy scheme has the potential to exacerbate housing market supply shortages by actually increasing demand for homes.”
“This plan has frequently increased home prices and further decreased the availability of affordable housing. Lack of affordable housing is one of the main issues facing the housing industry, especially in urban regions where land is few and demand is high.
More options are required for first-time buyers.
The notion of reviving the scheme was supported by several people as well. Operations director at The Mortgage Stop Rohit Kohli stated: “Help to Buy supported thousands of people into their first home, and it’s welcome news that it’s being considered again after being completely overlooked in the budget.”
But he believed that it ought to be a part of a larger package of assistance for prospective first-time buyers.
This must be a part of a wider variety of solutions, he continued, including looking at more creative methods to assist renters who pay thousands of dollars a year get through affordability barriers.
“Help to Buy itself does need to be examined because it isn’t flawless; for instance, it can be difficult to raise money for home upgrades rather than a stairway to full ownership. And the costs associated with help-to-buy programmes (valuation fees, legal fees, etc.) can add up very quickly.
What additional programmes are accessible to first-time buyers?
The Lifetime ISA, a government-backed savings programme where savers can deposit up to £4k annually, is a good place for first-time buyers to look for assistance to help them become homeowners.
Using this account has the advantage of giving savers a 25% bonus, which they will earn when they purchase their first house.
Another choice for people who are having trouble saving a deposit is shared ownership. This enables buyers to acquire a portion of a property while paying rent on the remaining portion. It offers a terrific way to take that crucial first step on the ladder, but it is limited to specific homes that are overseen by housing associations, so you will need to focus your search.
Additionally, it might be worthwhile to check to see if you qualify for the First Homes or Mortgage Guarantee schemes.