The government’s Help to Buy scheme saw a massive slow down in the second quarter of this year, with completions down 26 per cent compared to the same period in 2021.
Industry experts have said the latest statistics released yesterday (November 11) by the Department for Levelling Up, Housing & Communities, have shown that the scheme’s popularity has dwindled following the stamp duty holiday.
The scheme closed to new applications on October 31 of this year, with legal completions needing to happen before March 31, 2023.
From April to June this year, 8,018 properties were bought with an equity loan from the scheme.
“The full picture will become clearer when Q3 figures are released, but it looks more like [the scheme] ended with a whimper rather than a bang,” James Turford, chief operating officer of Even said.
Help to Buy ISA usage was also down, according to the statistics released yesterday.
The government scheme, which sees an additional 25 per cent added to savings of first time buyers, is on track to have the lowest year of usage since 2017.
The scheme closed for new savers in 2019, but remains open for existing savers until 2029.
AJ Bell’s head of personal finance, Laura Suter said a further drop in usage of the ISA is likely with fears of a house price crash putting off first home buyers.
“The drop-off also can’t even be blamed on the recent mortgage market turmoil, which saw rates soar and many delay their house buying plans as a result, as this happened in September,” she added.
For the Help to Buy equity scheme, completions were down by the greatest amount in the West Midlands which saw a year-on-year drop of 43 per cent.
The scheme, introduced almost a decade ago, allowed the government to offer up to 20 per cent of a newly built house or flat’s value (40 per cent in Greater London) in the form of an equity loan, with the home buyer able to put down a minimum 5 per cent deposit.
It was updated in April 2021 with new regional price caps and was restricted to applications from first time buyers only.
From April 2013, when the scheme began, to the end of June 2022, a total of 369,104 properties were bought with an equity loan, with a total loan value of £23.1bn.
According to the DLUHC, as of June this year, the value of the properties sold under the scheme totalled £103.2bn.
Turford, whose firm specialises in interest-free equity loans to help first time buyers boost their deposits, said the changes introduced to the scheme last year impacted its popularity.
But he noted that this year’s tougher economic climate, with real incomes falling and interest rates rising, also contributed to the dwindling uptake of the scheme.
“Buoyed by the stamp duty holiday rush, the scheme saw a recent peak in 2021, and completions have been on the slide ever since,” he said.
“There are still options out there, with private sector innovation taking off to fill in the gap left by the scheme, and mortgage rates are showing signs of retreating somewhat,” Turford added.