At the Conservative Party conference in Manchester, Theresa May announced the government’s plans to inject new life into the Help to Buy scheme, with an extra £10 billion to be added to the pot.
This means 135,000 new borrowers can join the scheme, improving their chances of getting on the property market.
This extra cash will help buyers get a mortgage on new-build properties valued up to £600,000 with a deposit as low as 5% .
May omitted details of where the money is being sourced from, but said that details would be outlined in the November budget.
The Help to Buy scheme has already helped 200,000 people buy a newly-built property in the past four years, which according to the Home Builders Federation accounts for one in 12 first-time buyers.
Reasons for the extension
Many commentators say this is an attempt to win back younger voters to the Conservative party.
Younger people have much less chance than their parents’ generation of buying a house in the ever more expensive housing market.
In fact, home ownership with people aged 24-35 has dropped significantly and that almost half of the group rent from a private landlord.
Plus, the Department for Communities and Local Government found that just 62% of the 22.8 million homeowners in England actually live at the property, which is down from 70% in 2003.
This confirms the rise in the number of buy-to-let landlords.
Is the extension a good thing?
Not everyone is enthusiastic about the changes to the Help to Buy scheme. Critics say it props up a dysfunctional housing market by enabling more people to compete for a static number of properties.
Polly Neate, chief executive of MoneySuperMarket’s corporate charity partner, Shelter said: “Extending Help to Buy is the wrong priority at a time when over a million renters are struggling with crippling housing costs.
“Help to Buy has barely helped the first-time buyers it is targeted at and has done nothing to help those worst affected by our broken housing market and those at risk of homelessness.
“Moreover it has increased house prices and propped up a speculative development model in need of reform.”
What is Help to Buy?
- Help to Buy started in April 2013, offering a 20% property loan from the government to first-time buyers of newly-built properties worth up to £600,000.
- These buyers need a 5% deposit – which is deemed affordable for the majority of first-time buyers.
- Help to Buy cash can only be used for the purchase of newly built homes.
- Then, when the property is sold, the government takes back its loan and makes a profit if the property's value has risen.
Read more on Help to Buy with the MoneySuperMarket guide.
Social housing extension
At her party’s conference, the Prime Minister also said the government will inject £2 billion to build 25,000 extra homes available for ‘social rent’ – or council houses – in a big shake-up of a ‘broken’ housing market.
The money will be bid for and the properties built by local councils and housing associations.