HTB - a shift towards the lending community?

The next stage in the evolution of the Government's Help to Buy 'brand' was announced this week, when details of the HTB ISA were unveiled for the first time.

Patrick Bamford
9th November 2015
patrick bamford genworth

First-time buyers will be able to open these saving products from the 1st December through a number of the larger banks and building societies who have already announced they will be offering them.

In a nutshell it allows those who have never previously owned their own property to save on a monthly basis up to a maximum of £12k and, at the time of purchase, receive a bonus from the Government up to £3k. We should also not forget that those buying in a couple can each open separate ISAs meaning the bonus could be effectively doubled if they both manage to save up to that maximum amount.

Help to Buy ISAs have to be opened prior to December 2019; the institutions will also pay interest on the account as per normal cash ISAs however the Government bonus will only be given at the time of actual purchase. It should also be pointed out that the bonus is only applicable on properties up to £450k in London, and £250k elsewhere.

Given this, and the fact that house price increases might well be expected to continue upwards for the foreseeable future, one might wonder whether these maximum property values will be moved as time progresses. It should also be pointed out that there are no restrictions when it comes to the property being purchased, unlike with the other Help to Buy schemes.

The future of the Help to Buy ‘brand’ therefore looks assured at least up until the end of the decade, and one can sense that these timings are deliberate. After all, Help to Buy 1 is due to continue for at least another four years, and now the ISA opportunity will only be withdrawn at the same time. That being said, existing ISA savers can continue to save in their HTB accounts after they have been withdrawn for new account holders, up until those maximums have been reached and they are in a position to purchase their first home.

As one further part of the brand is developed, another – HTB2 – will begin its rather slow withdrawal over the next 12 months. With HTB ISAs the onus is being placed on first-timers saving for their deposits, rather than any continued State support – via a mortgage guarantee – for lenders. This shift of emphasis comes at a time when I suspect (apart from in the world of new-build which clearly needs further Government focus) the ruling party want to have the lending community standing on its own two feet when it comes to providing higher LTV loans.

One might even argue that HTB2 could possibly be wound down even sooner, opening the door for a private mortgage insurance solution much more quickly. Certainly, the lenders involved in HTB2 are already beginning to adjust their high LTV product offering and take more of these loans outside the parameters of the scheme. However there are clearly greater risks involved in this approach and one might suspect that others will instead look to private insurance in the future in order to supplant the Government guarantee and continue to deliver over-riding peace of mind and certainty for all stakeholders.

As a Government-focused, housing policy, success story, Help to Buy is likely to be with us for some time, however the shift in emphasis is clear to see and, in the case of HTB2, we need to move towards lenders utilising private rather than State options, sooner rather than later.

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