Housing delivery could be impacted by end of Help to Buy scheme

Melanie Spencer
January 11, 2023
January 9, 2023
Insights

With the government’s Help to Buy scheme coming to a close, some in the mortgage industry have warned that housing delivery will ‘inevitably drop’ as a result.

According to Finova’s head of payment and mortgage services, Melanie Spencer, the end of Help to Buy will curb the “already limited supply of new properties on the market”.

Finova, a banking technology firm and mortgage club is a partner to more than 450 brokers and 70 lenders.

Applications to the government's Help to Buy scheme closed in October and the scheme will be fully wound up at the end of March 2023.

But in December, Homes England, the non-departmental public body sponsored by the Department for Levelling Up, Housing and Communities, announced that the practical completion deadline for the scheme would be extended by one month to allow completions to take place.

“The government is yet to commit to a replacement for the popular and successful scheme, leaving many first-time buyers uneasy about the options available to them,” Spencer said.

“A real positive has been the uptick in alternative lenders coming to the market to help these buyers, with products that allow a contribution from the ‘Bank of Mum and Dad’ or joint-borrower sole proprietor mortgages.”

Speaking to FTAdviser, Spencer added that the government has shown “an ongoing commitment to tackling the UK’s housing shortage, but the recent decision to scrap mandatory targets is likely to set efforts back by some way”.

Spencer was referring to the U-turn by Michael Gove earlier in December when the housing secretary rolled back on the government’s manifesto pledge to build 300,000 new homes by 2025.

“As an industry, we need to encourage the rapid development of affordable new housing in places that need it the most,” Spencer said.

2023 - the year of the specialist?

Reflecting on the year to come, Spencer predicts a more stable mortgage market in 2023, although she admitted it is unlikely that rates will return to the historic lows seen in the past two years.

Some 1.8mn homeowners are expected to reach the end of their fixed-rate deal next year, meaning that 2023 is likely to be a fruitful year for the remortgage market.

“Advisers and lenders need to be well-equipped to guide these customers through their remortgage options - some of whom could be navigating a shift in their finances after a costly 2022,” Spencer said.

She added: “To this end, specialist lending will continue to play a valuable role in mortgage lending next year. We know from experience that certain groups, like self-employed borrowers, already experience more difficulties than their counterparts, and with many borrowers now dealing with adverse credit, niche solutions will be vital to helping them secure a mortgage.”

Spencer pointed out that there is now a “sizeable portion” of the market that is not supported by traditional high-street lending.

As such, she believes competition will intensify and there will be greater product innovation in the specialist sector.

Outside of the residential market, Spencer reckons professional landlords are in for a “successful year” in 2023.

“With demand for rental homes piling on the pressure in the last year, we shouldn’t expect any respite from ‘generation rent’ in 2023,” Spencer said.

“Younger generations are increasingly reluctant to make the transition from renting to home ownership, especially with rising living costs starting to bite, and we can expect to see professional landlords capitalise on this demand to expand their buy-to-let portfolios.”

Featured on FT Adviser.

20 years’ experience working within Financial Services.