The UK Government has confirmed the ending of one of David Cameron’s flagship housing policies; Help to Buy Mortgage scheme.
While some officials have commented that it is a U-turn, researchers have highlighted that this particular part of the Help to Buy Scheme was always going to end on December 31.
In a letter sent to the Bank of England yesterday, Chancellor Philip Hammond said the scheme would not be extended past the year 2016.
In the £12bn guarantee scheme, the Government stands behind lenders running high stress 95% mortgages. This has been available to buyers of both new and secondhand properties since January 2014, but it reassures lenders instead of buyers that if the lender has to repossess the property, they will not lose out.
Other sections of the Help to Buy scheme including the equity loan scheme which is available on new builds only & the ISA bank account will continue to operate.
The loan element of this scheme is less controversial as it can only be used on new homes, which means it is linked in some way to supply, whereas the ISA scheme effectively gives additional money to people who have saved a deposit.
In the letter, Hammond said the guarantee scheme had already aided over 86,000 households and would still ‘end as planned.’
Richard Sexton, director at e.surv, said: “To date, the Government has demonstrated enthusiasm in its appetite to support the housing market.”
He went on to claim: “This U-turn by the Chancellor begs the question of whether a change of emphasis is afoot. A fluid housing market is key to the overall health of the economy, and supporting first time buyers onto the property ladder is critical to achieving that.
“The early success of the scheme led many high street lenders to include higher LTV products in their offerings. With this in mind, the withdrawal of Help to Buy may not have a dramatic an impact on the market. However, lenders who made plans to include the scheme as part of their product range may now have to revise their strategies.
“It will be interesting to see how this move affects transaction levels over the coming months, and how lenders and borrowers alike react to the change.
“While the housing market is certainly on the road to recovery, we are not out of the woods yet, and the industry and the Government need to work together to ensure the market remains accessible to those looking to take their first steps onto the ladder.”