/ Home & Energy, Money

Help to Buy is no silver bullet

Book with cardboard house

Around 40,000 first-time buyers now own their own home, thanks to the government’s Help to Buy scheme. But it alone isn’t the answer to Britain’s housing problems.

Getting a first step on to the housing ladder is a cherished ambition for much of the adult population. But rising house prices, short supply and a post-crash ‘mortgage famine’ made it all but impossible, until recently, for those without a big deposit.

Help to Buy was launched by the government in April 2013 with the declared aim of ending this situation. It was supposed to help new buyers, but also existing homeowners stuck in homes they’d outgrown. At the time, there were concerns about overheating, and that the new money released would simply push up prices for people who would have bought anyway.

Buyers with small deposits

Eighteen months after it began, official figures show that the scheme has helped more than 48,000 people, of which 40,000 were first-time buyers. In addition, many more buyers with small deposits (5% to 10%) have been offered deals by lenders outside the scheme, perhaps encouraged by the government’s example.

Our research shows that 95% mortgages now account for more than 5% of the deals on offer – compared with a low of 1.7% as recently as August 2013. So far, so good, but there remains a major problem for would-be buyers – affordability. It’s all very well getting a 95% mortgage, but the dream of home ownership soon turns sour if you can’t afford to keep up repayments. This is a particular worry as the era of low interest rates draws to a close. Lenders are required to ‘stress test’ loans against future rate rises and the result may well push mortgages out of reach again for first-time buyers.

What do you believe are the answers to the housing market? Should there be more new builds and more affordable housing stock? Should there be measures in place to encourage cheaper rented accommodation?


One of the problems associated with first time buyers who, after all, are responsible for kickstarting the housing market was, and still is, banks preferring to lend to investors for ‘buy to let’ purposes who with collateral tied up in their main homes are prioritised over first time buyers and who have been able to snap up affordable smaller homes leaving first time buyers unable to compete and at the opposite end of the spectrum, elderly people wishing to downsize to a smaller property have been unable to do so and remain stuck in too large a home. Consequently young people have been left with no alternative other than to pay inflated rentals to landlords or stay with parents until reaching well into their 30’s and elderly people have been unable to sell their homes.

I would add I have no qualms about landlords purchasing second properties if they can afford to pay cash for them but the onus is on the banks to lend and give more priority to first time buyers over greedy landlords when issuing loans for mortgage purposes.

I agree with Beryl. There is no doubt that the explosion of “buy-to-let” landlording over the last two decades, supported imprudently to excess by the banks and other mortgagees, has caused major disturbance in the property market. It has “get rich quick” tattooed all over it as it consists basically of leveraged speculation predicated on the likelihood that property values will continue to rise because it is well known that new home creation consistently fails to keep pace with demand. Apart from the economic consequences it is detrimental to the condition of housing in this country and leading to under-sized living units taking us back towards the densities and insanitary conditions prevalent in the 19th century where the lack of light and air in city dwellings was responsible for much of the poor physical and mental health of the population. “Help to Buy” has stimulated the new homes market and this should, along the chain, bear down on the price of property at the lower and middle levels but it will not happen overnight at the present rate of development.

It seems to me that the answer is twofold: (a) to get a lot more properties onto the market in places where they are needed, and (b) to get more jobs into the places where there are enough houses. The first part would be helped if there were more mobility of population so that people who no longer needed to live in the cities for work or family reasons could relocate. And looking at the second part, some towns are dying on their feet because investment in property is not worth it; old industries have declined or closed down and there is a surfeit of residential property [evidenced by the very low values] because there are no jobs suitable for today’s working generation. Elsewhere, as the popular property programmes remind us, in several major cities the price of a small flat with any sort of amenity has sky-rocketed out of reach of ordinary working people. A transfer of work, especially non-industrial occupations, is necessary to rebalance the drift to the cities.

Whether or not the “right-to-buy” policy forcing local authorities to sell their property to their tenants was a good or bad thing in principle, the fact that those councils were prevented from producing replacement or additional stock to meet the needs of their populations was a dreadful scandal. And in many areas, over the course of time, the decent local authority landlord has been replaced by a plethora of private speculators whose sole [and short-term] concern is maximum profit. There are signs outside the metropolitan areas that rentals are stabilising or even falling because there are more lets on the market than tenants to take them. Also, tenants are churning to take advantage of better homes/lower rents which is leading to more voids, additional costs, and less certainty of income for landlords. This might take some of them out of the competition for new flats which has made it particularly diffcult for young buyers to enter the market. It’s time the north [and east and west] was made magnetic again.

There is a shortage of houses and flats where they are needed most – particularly in the southeast. Yo cannot defeat market forces in determining prices – when demand exceeds supply people will pay a premium, whether to rent or buy.

Two possible solutions – both long term.
Give businesses and public bodies incentives to move to parts of the country where housing and land is more available and cheaper; people can follow.

Build council houses for rent to genuinely worthy people, but ensure that they are on short agreements so when an occupant can fund a market rent or a purchase the house is made available to another person in need. Don’t allow unrestriced lifetime occupancy, nor passing on to dependants, and don’t sell them at a discount. Land cost is the big issue, so since granting planning permission to developers is in the gift of the council, make it a condition that the developer also provides a specific amount of land to the council for their houses. A £50 000 dwelling would let for £50 a week, giving the council a 5% return.

Incidentally, we could build 1.2 million such dwellings for the cost of HS2. Which is socially more desirable?