The Help to Buy Equity Loan Scheme continues to gather momentum, growing significantly in the year to March 31st 2019.
According to figures released by the Ministry of Housing, Communities and Local Government (MHCLG), 52,404 housing transactions were completed using the Help to Buy Equity Loan scheme in the year to March 2019. This represents a 9% increase on the 48,180 completions in the year to March 2018.
43,248 of the annual total were first-time buyers which means 82.5% of the total figures used the scheme to buy a home for the first time. More first-time buyers (FTB) used the scheme in the year to March 2019 when compared with the overall average od 81% aggregated since Help to Buy was launched in 2013.
The popularity of the scheme in London has increased significantly since the government increased the maximum loan value from 20% to 40% in 2016. In the year to March 2019, the 6,115 completed transactions using the scheme equates to a rise of almost a third (30%) from the year previous.
However, in the opening quarter of 2019, transactions have taken a clear tumble by around a third when compared with the final quarter of 2018. However, when compared with the 10,095 transactions from Q1 2018, the opening quarter’s 10,375 transactions represents a marginal increase.
Between April 1st 2013 and March 31st 2019 221,405 properties have been purchased using an equity loan. The combined value of the property purchases exceeds £57 billion and the total value of the equity loans is worth £12.46 billion.
Under the terms of the scheme, the equity loan remains interest free for five years. Some have suggested that given the premium of up to 10% paid by the buyer for new build property and the stalling property market since the referendum in 2016, some homeowners, looking to sell their homes, may find themselves worse off until the house prices exceed the new build premium and the property is able to accrue equity.
Based on the Office of National Statistics (ONS) House Price Index data, it would seem that many homeowners, who are nearing the end of their five-year interest free period or have already exceeded the deadline, may struggle.
The mean equity loan taken out by those using the Help to Buy Equity Loan Scheme is currently £56,527. When the average house price has increased by £51,767 since December 2013, homeowners who purchased their property in 2013 may not see an equity benefit by the time they have paid their loan.
If they stay in their home long-term, this may not be an issue. However, for those whose circumstances have changed and may need to move before of just after the five year period, may struggle to up-size by the time the government retake their share of the property.
The scheme will become exclusive to FTBs after 2021 and is set to end in 2023. However, new housing minister, Robert Jenrick has intimated that discussions with the new chancellor and previous housing secretary, Sajid Javid, could see the scheme extended under the new administration.
Robert Jenrick, Secretary of State for Housing, Communities and Local Government, commented:
“This is a new administration, a new Chancellor, I think all options are on the table. I intend to have further discussions with Sajid Javid in the weeks and months to come.”
How important has Help to Buy been for the housing market? What issues will the equity loan create for buyers wishing to sell their homes shortly after purchase?
