Agency boss calls for new and clearer Help to Buy Scheme
LRG’s New Homes boss Tim Foreman suggests an improved Help to Buy scheme could give the housing market a much-needed boost.
Estate agency brand LRG has joined calls for a revived Help to Buy scheme.
Tim Foreman (pictured), Managing Director of Land and New Homes at LRG, suggests a new scheme should aim to restore property demand without repeating the shortcomings of the original scheme.
He suggests a modern Help to Buy scheme should be limited to first-time buyers purchasing new homes, with regional price caps, appropriate income limits and support proportionate to local affordability.
It should concentrate public money on households that can sustain a mortgage, but cannot bridge the deposit or affordability gap without assistance, he says.
However, he adds that clearer repayment terms and a simpler redemption process would address some of the original scheme’s weaknesses.
If the Government is to at least try to deliver 1.5 million homes this Parliament, it must help create the market that will buy those homes.”
Foreman explains: “The Government could also require participating developers to contribute towards its cost, ensuring that the industry shares both the benefit and the financial responsibility.
“This should sit alongside the permanent mortgage guarantee scheme, sensible mortgage regulation and stronger support for shared ownership. But those policies do not remove the case for targeted equity assistance.
“A 95% mortgage helps with the deposit, but it does not necessarily make monthly payments affordable. An equity loan reduces both the deposit requirement and the initial mortgage burden.”
A targeted successor
Speaking ahead of the Labour Party Conference this weekend, Foreman says first-time buyer support should be treated as part of its housebuilding programme, not as a separate consumer benefit.
He adds: “A carefully targeted successor to Help to Buy would widen access to ownership, restore confidence at the sales end of the market and give developers a commercial reason to convert more permissions into starts.
“If the Government is to at least try to deliver 1.5 million homes this Parliament, it must help create the market that will buy those homes.”
It comes after a Government review last week suggests the Help to Buy Equity Loan Scheme did provide value for money and boost property supply at least in the early stages.
If this is supposed to target help for First Time Buyers, why limit it to new homes? Oh – because just like last time it’s supposed to be there just to help the developers! Developers made a rod for their own backs by overinflating prices last time the scheme was around which now means they can’t sell their current stock because it’s priced incorrectly without the scheme. The only way to stop developers from over pricing their properties is to make the scheme available on the Residential secondhand homes market as well. This way it means that New homes are kept in line with the prices of the open market. Still, the easiest way for the government to introduce something that will genuinely help first time buyers is to bring out an indemnity scheme for the top 10% of 100% mortgages. I.e. should a buyer be repossessed the government will guarantee repayment of the Top 10% of the original loan. Charge buyers £250 to enter into the scheme so the government actually makes money upfront; ensure lending criteria is appropriate on five year fixed mortgages only. This should mean very few properties are repossessed and equity builds in the property over the five-year period which minimises risk to the government. It’s not the monthly affordability that’s stopping first time buyers getting into the market, it’s the amount of the deposit required. Keep it simple!