The Government is set to pump an extra £10bn into its Help to Buy scheme as Prime Minister Theresa May has pledged to “fix the broken housing market”.
The extra funding, which will go to the Equity Loan scheme that enables people to buy a property with just a 5% deposit, is expected to help an additional 135,000 people purchase a home by 2021.
The announcement comes as the Government said it would also be allocating an extra £2.5m to speed up the delivery of more than 150,000 new homes in England through its garden towns (new, self-contained communities surrounded by green belt) initiative.
On the final day of the Conservative party conference (4 October), the PM also said a further £2bn would be allocated to enable councils to build additional affordable homes.
Why is this happening?
The Government has made a commitment to help more people own their own property.
The extension of the Help to Buy scheme should help more people get on to the property ladder without having to save a huge deposit.
Help to Buy has already been used for 130,000 purchases, 81% of which were made by first-time buyers.
But the Government has also made clear that the key to helping people obtain a property in the long-run lies in making homes more affordable by increasing the rate at which they are being built.
The garden towns initiative aims to do this by building an additional 150,000 new properties in self-contained communities in new areas, rather than existing urban ones.
Who does it affect?
The extension of the Help to Buy scheme is most likely to benefit first-time buyers.
But measures to accelerate the pace at which the UK builds new homes should assist both first-time buyers and those looking to trade up the property ladder by helping to keep property more affordable.
Meanwhile, the pledge to build more council homes will help those who are unable or do not want to buy a property themselves.
Reacting to the promise of more affordable housing, Charles McDowell, commercial director (mortgages) at Aldermore, said the specialist lender was ‘glad’ the Government was continuing to put housing on its agenda.
Charles said that Aldermore’s latest research showed that over a quarter (26%) of prospective first-time buyers want to see the Government build more houses, and 34% believe it could take them five or more years to get on the property ladder.
He added: “It is a particularly difficult time for first-time buyers due to demand significantly outmatching the supply of homes. We believe more needs to be done to increase house building, so it is promising to see that the Government has assured developers that land will be available for construction.”
Sounds interesting. What’s the background?
The Help to Buy scheme is just one of the measures put in place to help people get on to the property ladder.
The Government has also launched the Starter Home initiative, which enables first-time buyers to purchase a property for below the market rate, as well as the Help to Buy ISA, whereby it tops up the savings of those setting aside money for a house deposit by 25%, or up to £3,000.
But at the heart of the UK’s housing woes is the fact the country is not building enough properties.
It is estimated that 250,000 new homes need to be built each year, just to keep pace with demand, but only around 150,000 a year are completed.
In the recent Housing White Paper, the Government pledged to address the issues that delay new homes being built.
Top 3 takeaways
- The Government is set to pump an extra £10bn into its Help to Buy scheme
- This extra funding is expected to help an additional 135,000 people purchase a home by 2021
- It is also allocating an additional £2.5m to speed up the delivery of more than 150,000 new homes through its garden towns initiative