Chancellor allocates less cash than initially hoped for scheme starting in April
Rishi Sunak has allocated £5.2bn of government funding for the two-year Help to Buy scheme due to start in April.
Treasury documents issued following yesterday’s spending review statement say the support scheme, under which home buyers are offered an equity loan of 20% to pay for the bulk of a deposit in a new-build, will be given £2.2bn next financial year and £3bn in 2021-22.
The funding appears to be a reduction from the amount originally allocated to the scheme when it was announced by the then chancellor Philip Hammond in autumn 2018. At the time, Treasury documents suggested the scheme would be allocated £8.5bn over the two years.
The funding is, however, broadly on a par with spending on the scheme to date. According to the latest statistics, £16bn was spent on Help to Buy equity loans in the first seven years since its set-up in 2013, at a rate of £2.3bn per year.
The documents said the funding allocation was based on “latest forecasts of uptake and will be kept under review”.
The new scheme, which is set to replace the existing Help to Buy scheme in April, is set to be less generous as it will be restricted to first-time buyers, who will only be able to use it to buy homes below a regional price cap set at 1.5 times the value of average first-time buyer prices.
The government said last week that it will open the new scheme to purchasers in December. Housebuilders have reported high demand for Help to Buy, given the reluctance of mortgage lenders to offer loans at high loan-to-value rates in the wake of the pandemic.
The current scheme has assisted the purchase of 273,000 properties with a value of over £73bn up to March this year.
The funding for Help to Buy is in addition to the £7.1bn National Home Building Fund announced by the chancellor yesterday. This included £2.3bn of new money for housing, the bulk of which will be ploughed into the government Help to Build programme, which supports self and custom-builders in the same way that Help to Buy supports new-build purchasers.