Despite Help to Buy's positive statistics the scheme has its flaws
30 November 2018
If you are covering today’s statistics from the Treasury about the use of the Help to Buy scheme please see the following comment from Gemma Harle, managing director of Intrinsic mortgage network, part of Quilter:
“The Help to Buy scheme has received lots of industry criticism as a scheme to increase housebuilder profits, however the latest figures show it must be celebrated at least for driving down the average age of a first time buyer. Those who buy with Help to Buy ISA scheme have an average age of 27 compared to the national average of 30. Getting on the housing ladder earlier ultimately means that you have longer to pay off your mortgage and gives you fighting chance of being mortgage free in retirement.
“According to our research*, 29% of people who retired recently did so with some form of debt, with 13% saying that that debt was mortgage related. More worrying is that these retirees enjoyed lower house prices and as a result lower mortgages than those applying now. Similarly, the standard length of mortgage is usually 25 years but we are increasingly seeing lenders offering mortgages which run for as long as 40 years meaning that 13% figure is likely to skyrocket in years to come.
“While the fact that Help To Buy has helped 400,000 first time buyers get on the housing ladder is certainly no bad thing, the scheme does have its flaws. There have been reports that the scheme has left some first time buyers as mortgage prisoners. This is where those who first entered into the scheme and are now looking to remortgage are finding themselves trapped having to pay an expensive variable rate mortgage with few options from lenders elsewhere.
“Help to Buy has clearly heralded some positivity for a generation who face an uphill battle to get on the housing ladder, however the problem is the scheme hasn’t actually increased the amount of property being built but rather changed the type of property being built. For example, it is rare to see new build bungalows anywhere in the market anymore. Therefore, the focus might be better placed on building more new housing stock which appeals to a second or third time buyer or incentivising this group to move up the property ladder in other ways so that more stock lower down the chain is freed up creating a more buoyant market.”
*YouGov survey commissioned by Quilter, October 2018, of 2000 respondents from across the UK