Restricting Help to Buy to first-time buyers alone will encourage the production of “smaller, lower value properties that are more affordable” for FTBs, according to research by Savills looking at the changes announced in last autumn’s Budget.
From 2021, H2B will be restricted to FTBs, with the maximum eligible property value varying by region. Until then it is open to all buyers regardless of income, and for properties worth up to £600,000.
The research suggests the scheme has provided a significant boost to home movers in more expensive areas. Savills calculates that around 18 per cent of H2B participants in the 12 months to June 2018 were home movers rather than FTBs. Over that period, 9,100 home movers – about 3 per cent of all mortgaged home movers – had a H2B loan.
However, the research found that house prices and their regional variation were the principle factors behind this trend. Areas such as Ipswich and Islington had no H2B sales to movers in the 12-month period, while others such as Hackney and Eastleigh had a much higher proportion. Table 1 shows the top 10 areas for H2B sales to home movers.
Table 1: Top local authorities by Help to Buy sales to home movers, year to June 2018
Local authority | Region | All H2B loans | FTBs | Movers | Mover share (%) |
Hackney | London | 206 | 123 | 83 | 40 |
Eastleigh | South East | 277 | 170 | 107 | 39 |
Daventry | East Midlands | 247 | 154 | 93 | 38 |
Chorley | North West | 184 | 118 | 66 | 36 |
Redditch | West Midlands | 115 | 74 | 41 | 36 |
Nuneaton and Bedworth | West Midlands | 193 | 125 | 68 | 35 |
Charnwood | East Midlands | 284 | 184 | 100 | 35 |
Wychavon | West Midlands | 262 | 171 | 91 | 35 |
Amber Valley | East Midlands | 128 | 84 | 44 | 34 |
Stafford | West Midlands | 261 | 172 | 89 | 34 |
Source: MHCLG. Copyright: Money Management
Savills argues that excluding home movers from the scheme will encourage the building of smaller, more affordable properties, because the average H2B property sold to FTBs is worth £272,000 compared with £319,000 for those sold to movers. It dismisses the suggestion that ending H2B for this group would bar them from the property market altogether – despite the fact that Ministry of Housing, Communities and Local Government data suggests a third of movers would not have been able to do so without such help.
A common accusation about H2B has been that it has helped to push up prices, but the MHCLG says that is not the case as the scheme has accounted for only 9 per cent of all mortgages and 15 per cent of FTB mortgages.
Nevertheless, the ministry concedes that the scheme’s effect on demand is likely to have had some impact on new-build prices. It suggests H2B has helped to boost the price of new-build homes, causing the premium paid for such properties to rise to around 15 per cent after a period of decline following the financial crisis.
Regional caps
Savills says the decision to cap property values on a regional basis will clearly have an impact. Of the homes sold via H2B in the year to June 2018, 32 per cent were above the proposed regional caps. In 10 local authorities, the cap would cover 75 per cent of all H2B transactions. In Daventry, for example, 90 per cent of H2B sales in the 12 months to June 2018 would be excluded under the new caps.
The report says that while the scheme has been relatively more popular in the North and North East than the South, London is currently the only region where the £600,000 price limit ‘bites’. The lower price caps proposed in the North and North East suggest the changes will have a significant impact on take-up in those regions.
