Ministers are to end the popular Help to Buy home ownership scheme in 2023, bringing an end to a flagship loan programme that critics say has helped to push up UK house prices.
The Treasury said it would extend the scheme, which enables homebuyers to purchase newly built homes with deposits of only 5 per cent, for another two years after its current scheduled end in 2021.
But it added: “The government does not intend to introduce a further Help to Buy Equity Loan Scheme after 2023.”
For the final two years of Help to Buy, the government will invest another £7.2bn in equity loans to homebuyers, but will restrict the scheme to first-time buyers and cap the prices of the homes that can be bought using its state-backed equity loans.
The Home Builders Federation, which represents housebuilders, welcomed the extension to the scheme.
However Lucian Cook, head of UK residential research at the property agents Savills, said: “The big story here is that it will only be extended to 2023. That puts housebuilders on notice that they will no longer have a government-backed safety net and will have to more forensic about what they deliver and where they build it.
“That has the potential to stall the growth in housebuilding unless we have a package of measures that support more housebuilding across a wider range of tenures.” The Resolution Foundation, a think-tank, said the scheme remained “poorly targeted”.
Help to Buy currently supports about a third of housebuilders’ private sales and by March had aided almost 170,000 home purchases; almost a fifth of the buyers were already homeowners.
From 2021 the value of homes bought using the scheme, which was launched in 2013, will be capped at £600,000 in London and in the regions at a price calculated as 1.5 times the average forecast regional first-time buyer price. This will amount to £427,600 in the South East but will come in as low as £186,100 in the North East.
David Meecham, real estate partner at Pinsent Masons, said: “Help to Buy has consistently been seen as a mechanism for purchasers to buy properties that were otherwise out of their league, raising concerns that the market has been artificially inflated and purely boosting profits for housebuilders.
“While the extension of the scheme will be a boost for housebuyers, it’s not the answer to addressing this artificial inflation.”
Meanwhile, a review of housebuilding on large sites, carried out by the former minister Oliver Letwin, on Monday recommended tougher requirements for developers on such sites, requiring them to build a mixture of housing types including affordable homes for both sale and rent.
Extra government funding should be allocated to ensure this does not make construction unviable, Sir Oliver advised. Philip Hammond, the chancellor, said the government would set out its response next year.
Mr Hammond also said he would add an additional £500m to the housing infrastructure fund, making £5.5bn in total.
He said the fund, which supports local authorities in building infrastructure for housing developments, would support construction of 650,000 homes in total as the UK battles a shortage of homes in popular areas.