Help to Buy mortgage guarantee scheme scrapped
The government has decided not to extend its Help to Buy mortgage guarantee scheme beyond the end of 2016, as previously planned.
Under the scheme, which was introduced in 2013, the government offers lenders the option to buy a guarantee on mortgage loans. This means lenders who take part can offer homebuyers more high loan-to-value mortgages of 80% to 95%, so first-time buyers can buy a home with a 5% deposit.
But in an open letter to Mark Carney, the governor of the Bank of England, Chancellor of the Exchequer Philip Hammond points out that there are now more than 30 lenders offering 90% to 95% loans outside the scheme. He says that the scheme was introduced for a specific purpose of “kick-starting” the high loan-to-value market, and this has now been achieved.
Mr Hammond adds that more than 86,000 households have been supported by the mortgage guarantee scheme, with an average property price of £157,000 compared to a national average of £216,000.
Looking at Help to Buy schemes overall, the government’s latest quarterly statistics, published on 29 September, reveal that more than 185,000 people have been able to buy a new home as a result of the various schemes, including an Isa, shared ownership, equity loan, London Help to Buy, and the mortgage guarantee scheme. First-time buyers account for 81% or 150,000 of those who have bought under the scheme.
The average house price for homes bought with support from Help to Buy schemes is £191,000. The data also reveals that 95% of Help to Buy properties have been bought outside London.
Commenting on the scrapping of the mortgage guarantee scheme, Russell Quirk, chief executive of online estate agent eMoov, says: “On the face of it, it might seem like bad news for would-be homeowners, however the failure of the Help to Buy scheme has been pretty monumental in addressing the growing housing crisis.
“This announcement by Phillip Hammond marks a significant change in the ideology of this new Prime Minister and her government, an ideology that clearly does not share the Cameron-Osborne love affair with aspirational homeownership.
“This complete reversal could be seen as a real retrograde step and now leaves several hundred thousand would-be homebuyers who could benefit from the Help to Buy scheme – particularly those first-time buyers – without the assisted first rung of the property ladder to step on.
“I suspect that the direction of travel for the Prime Minister is to now promote build-to-let, which is an easier win than chasing ever higher house prices. Although it will be seen as an attack on those looking to buy in an ever inflated market, the government’s record of actually building new property has been less than woeful and so any attempt to address the shortage of property stock should be commended at the very least.
“If we do see this supply and demand imbalance start to level out, prices will follow suit, resulting in a more realistic ask for those looking to buy,” he adds.
The Rt Hon. Andrew Tyrie MP, chairman of the Treasury Committee, welcomed the news: “The Help to Buy mortgage guarantee scheme will not be missed. The Treasury Committee identified a number of problems with it, not least that it would inflate house prices and create a substantial liability for the taxpayer.”
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.