The Government has doomed first-time buyers with its pathetic Help to Buy extension

Linda J. Dodson

Before the pandemic, first-timers made up the biggest proportion of property buyers. It looked like the Government’s policies to boost home ownership – squeezing landlords, and promoting schemes to help get young people on the ladder – had actually, finally worked.

But now they are trapped, with each week bringing a new, punishing hurdle – and it’s partly due to the Government’s short-sightedness.

First-time buyers who had been saving diligently for a deposit found that during lockdown the goalposts had been moved. Cautious banks withdrew low deposit mortgages. According to comparison site Moneyfacts, there are now 68 mortgages with a 10pc deposit available, while at the beginning of March there were 779. For those with a 5pc deposit, there are just 20 currently on the market.

The banks that have brought these deals back have prescribed severe restrictions. Nationwide, Britain’s second-biggest lender, initially tripled the minimum deposit from 5pc to 15pc, before offering some with a 10pc deposit but with added conditions.

For those saving, that change represents thousands of pounds, and years’ worth of saving, that they have to find. Some luckier first-timers may be able to get family help to make up that difference. But there’s a problem there too: now Nationwide has tightened its restrictions on gifting from the Bank of Mum and Dad, saying that it won’t lend to buyers with low deposits unless they saved 75pc of it themselves, to ensure they will be able to make the repayments.

This is just one lender, but if this kind of caution becomes more widespread it would have a huge effect on the market. Around two-fifths of all mortgaged first-time buyers had assistance from the Bank of Mum and Dad last year, according to estate agency Savills.

Nationwide has also said it won’t lend on properties that are fewer than two years old, because they carry a new-build premium that will be lost and could land the buyer in negative equity.

All this underlines how cautious banks have become – and how difficult it is to get a mortgage if you are “risky”. Lenders are increasing checks on all applicants, while the few that offer low deposit mortgages are being overwhelmed by demand and almost immediately pulling them from the market. 

Those buyers who are left out have few options remaining. They could wait and hope more mortgages come back on the market, but the risk-averse lenders don’t look like they will be forthcoming. For many, the only other option is Help to Buy, the scheme where you can buy with a 5pc deposit and a Government-backed loan. 

With time running out on the imperfect but vital scheme, the Government was urged to extend it. And it did – by just two months, only helping those affected by building delays caused by lockdown.

It was a damp squib. Yes, the scheme has major flaws but an extension of the current system by a year or so could have filled the vacuum created by nervous banks withdrawing from the market. In April 2021, regional price caps will be brought in, which will exclude tens of thousands of people, including anyone buying a larger property in a more affordable area.

This is a kick in the teeth to the desperate first-time buyers who were being told by the Government that they could get on the ladder if they followed the right steps.

With a recession on the way, and a winding-up of furlough that will hit young people hardest, first-time buyer levels are likely to crash. The Government’s pro-home ownership rhetoric – at the cost of promoting a sustainable rental sector – is hollow if it won’t support young buyers when they really need it.

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