Advisers ‘need to be well versed’ in Help to Buy alternatives

Advisers ‘need to be well versed’ in Help to Buy alternatives
Anthony Devlin/Bloomberg

Mortgage advisers need to educate themselves on all the alternatives to Help to Buy, a scheme which has been successful in large part due to its visibility, according to a new industry body.

In a whitepaper published by the Industry Panel for Financial Advice, a newly formed group of mortgage advisers working closely with Sesame Bankhall Group, outlined their proposed reforms to make it easier for first-time buyers to own a home.

Among these reforms was a call for more competition in the equity scheme space, which IPFA argued has been dominated by Help to Buy due to its “strong brand” being promoted by developers, lenders, intermediaries and the government making it “impossible to miss”.

Article continues after advert

The body suggested the creation of an industry-wide campaign to draw more attention to these alternatives, including advisers getting more clued up on them.

“Advice here is crucial. Mortgage advisers need to be well versed in all the alternative schemes available,” said IPFA.

“As more private schemes enter the market, confusion among borrowers will grow. They will need advice to navigate through the options available.”

Alternative schemes include the government’s 95 per cent mortgage guarantee - designed to help more buyers put down a 5 per deposit - as well as First Homes, which offers first-time buyers a 30 per cent discount on a property’s market value, and shared ownership which allows someone to buy as little as a 25 per cent share while a housing association owns the remaining 75 per cent share.

Over the past year, there has been a flurry of privately backed alternatives to Help to Buy schemes coming to the market offering equity solutions. 

Fintech firms such as Proportunity, Generation Home and Even are beginning to crop up in brokers’ inboxes promising to help their younger clientele.

Working a lot like the government’s Help to Buy scheme, which is due to be wound down in October, startups like Proportunity promise to increase a home buyer’s budget for a deposit by up to £150,000, or 25 per cent.

“Alternative shared equity schemes, backed by private funds, should be promoted to the same extent as Help to Buy,” said IPFA.

“But with small marketing budgets, we need cross industry support to better promote, fund, support, facilitate and widen access to the existing range of alternative ownership schemes and products. 

“We also need to encourage more competition and innovation in the private sector for new schemes to materialise in the post Help to Buy environment.”

The government’s Help to Buy scheme has lent more than £20bn since it began back in April 2013, but a House of Lords report published earlier this year found the scheme had pushed up house prices in England and failed to “provide good value for money” for the taxpayer.