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Help to Buy scheme to close five months early

·4-min read
house for sale boris johnson
house for sale boris johnson

The Help to Buy property subsidy scheme is to close for applications five months early in a blow to thousands of first-time buyers desperate to get on the housing ladder.

The loan scheme, which has handed out an estimated £22bn of taxpayer funds since it was launched by George Osborne in 2013, will close to new applicants at the end of October.

Housebuilders — whose sales and share prices have been massively inflated by the subsidy — were told the programme would shut this autumn rather than at the end of next March on a call 11 days ago with Homes England, the quango responsible for new affordable housing.

Homes England assistant director Kasia Locherty then shocked participants on the call by ordering them not to tell the public about the changes. Any communications should be handled by the quango itself, Ms Locherty is understood to have said.

An industry source said: “We were surprised and disappointed to be put in the position where we’re not allowed to tell customers in good time of its withdrawal.

“This is such a popular policy of the Government – and it’s making the Treasury millions as well. They don’t seem to have thought through how upset young couples and families are going to be when they realise, at the last minute, that their first step on the housing ladder just got higher.”

Homes England told The Telegraph that it updated its website to reflect the Oct 31 deadline. The quango added that it would promote the closure timetable on its social media channels in the coming weeks.

The final applications for loans will be accepted in October, with all of them to be processed over the following five months.

A Government source said that the October deadline would allow enough time for customers to legally complete the purchase of their home before the scheme is entirely wound up at the end of March.

Backbench MP Sir Iain Duncan Smith, the former Conservative party leader, branded the decision “disgraceful”.

He said: “Government has trumpeted its successful outcomes and now turns a blind eye over an early closure. [It’s] hardly the action of a government wanting to bring home ownership to all.”

Kevin Hollinrake, Conservative MP for Thirsk and Malton, and co-founder of Hunters Estate Agents, said he was not in favour of the Help to Buy scheme because it targeted new build houses.

However, he said Homes England’s move appeared “extraordinary”.

Mr Hollinrake added: “If they are ending something early that was supposed to run until March - that is clearly wrong. This stuff should be done in a coordinated fashion, not in a piecemeal way. It should be done in accordance with government policy and government timelines."

First unveiled by Mr Osborne during his 2013 spring budget and initially designed to run for three years, Help to Buy was designed to help higher-risk homebuyers left locked out of the property market.

The scheme — which was the biggest government intervention in the market since Margaret Thatcher sold off council houses — allowed people to buy a home worth up to £600,000 with just a 5pc deposit. The Government guarantees the next 15pc of the loan for a fee, reducing the banks’ potential losses so they can offer cheaper mortgages.

In the years that followed, new derivations of the scheme included mortgage guarantees, shared ownership and Help to Buy Isas. In the first year of its operation, a fifth of the new-builds sold were purchased with the support of the Help to Buy scheme.

But rising interest rates and the country being plunged into a cost of living crisis has sparked concerns that some borrowers will not be able to remortgage their loans.

Figures published earlier this month showed that around 9,000 properties were bought with an equity loan under the scheme in the final three months of last year — down 41pc on the same quarter in 2019.  

Although the scheme has not lost money, according to Government filings, it continues to tie-up billions of pounds of capital from public sector finances.

Closing Help to Buy will reduce the burden on the Exchequer but leave the Conservative party without a new homebuyer scheme of substance ahead of a general election in 2024.

A spokesman for the Department for Levelling Up, Housing and Communities said: “Help to Buy has helped over 361,000 households to own their own home and will continue to help thousands of people until March 2023. The scheme is just one of the ways the Government has made homeownership more achievable and affordable.

“Shared ownership, first homes and the mortgage guarantee scheme continue to support homeownership and we are considering further options to help even more families own a home of their own.”

A spokesman for Homes England said: "The Help to Buy: Equity Loan scheme is due to close on 31 March 2023, by which time all sales transactions must be complete.

"The scheme will therefore close to new applications at 6pm on 31 October 2022."

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