Government urged to resurrect Help to Buy

The Government is facing calls to resurrect the Help to Buy Equity Loan scheme.

The housing support scheme, which provided a Government-backed loan worth up to 20% to boost a buyer’s deposit for a new-build, closed to new applicants in October 2022 with purchases due to complete by May 2023.

But with high interest rates, the continued cost-of-living crisis, significant planning delays and the slowdown in the property and housebuilding market, law firm Dutton Gregory Solicitors suggests further stimulus is required.

Paul Sams, partner at Dutton Gregory Solicitors, said Help to Buy should never have been scrapped.

He said: “At present, there is a real danger of a generation of young people being denied accessible home buying opportunities. 

“Meanwhile, the demand for rental properties far outweighs supply. Prior to a decade of Help to Buy, there was Home Buy Direct and First Buy, so how is it right that there is no longer a government initiative to make home ownership a possibility for those without a substantial deposit?

“The government’s First Homes initiative enables first time buyers that meet Local Authority criteria to secure a home for 30% - 50% less than its market value, but there are so few of these homes available. Unless there is a new prospect of a widespread first-time buyer assistance on the horizon, the only way forward is for more housebuilders to introduce their own private schemes in order to convert those in the rental trap to new homeowners.

“I do hope both the Conservatives and Labour will table a scheme similar to the previous Help to Buy within the next 12 months, but it is needed now. Housing developers have been lobbying for its resurrection – should they step up with their own initiative in the meantime when housing is such a national issue?  Should it be for the developers to decide this, or the political leaders of this country.”

Sams suggested Government key worker loans could work in a similar way and demonstrate meaningful support to public sector workers. 

He said housebuilders could also offer their own private alternatives such as Proportunity, Fairview Homes’ Save to Buy scheme and similar initiatives by St. Modwen Homes and Kettel Homes. 

However, current Help to Buy borrowers may not be feeling positive about the scheme as many are struggling to repay both the equity loan portion after the end of the five-year interest-free period as well as higher mortgage rates.

Mayor of London Sadiq Khan is calling for payment holidays as analysis shows up to 4,500 London homeowners are at risk of financial hardship as mortgage costs continue to rise and the Help to Buy loan grace periods end.

Analysis by City Hall found thousands of London homeowners could see their monthly bill rise by up to £900 a month as a result of higher interest rates and expensive Help to Buy payments.

By introducing a payment holiday, Khan argues, London homeowners with a Help to Buy loan could save on average £3,300 a year

Khan said: “People in London using Help to Buy may be on the housing ladder, but many are on low pay and facing growing levels of economic insecurity. 

“As Help to Buy grace periods come to an end and mortgage rates continue to rise, thousands of London’s recent first-time buyers are facing huge increased in their monthly payments.
“Ministers could do something to support these households straight away, by suspending or freezing Help to Buy loan payments, giving people breathing space when they need it most.”

Paula Higgins, chief executive of HomeOwners Alliance, said: “The Government can't hang vulnerable new homeowners out to dry.

“Homebuyers that purchased through the Help to Buy scheme are facing a barrage of soaring costs. Freezing the loan payments as the Mayor suggests could have a significant impact on desperate household budgets at this time.”