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?