Will landlords bear the brunt of Help to Buy?

Published: 30/10/2013

With two thirds of young adults planning on using the government’s Help to Buy Scheme to escape the rental market and buy a property of their own, should landlords be prepared for a business slump?

Help to Buy is a government initiative which helps first time buyers and existing homeowners get on or move up the property ladder with just a 5 per cent deposit. Lenders are able to offer 95 per cent mortgage deals as the government will provide them with a guarantee for up to 15 per cent of the property’s value in exchange for a fee. Initially unveiled in April 2013 the second phase of the scheme has just launched three months ahead of schedule and now allows buyers to purchase older properties as well as new builds.

The effect on the rental market

There have been mixed reviews surrounding the impact Help to Buy could have on landlords. However the majority agree demand continues to outweigh supply and few expect this to change even with increased availability in higher loan to value mortgages. Rob Denman, Head of GW LET, comments:

“While on paper Help to Buy aims to rejuvenate the property market and in particular help struggling first time buyers, there are many within the industry who have their doubts as to the real impact it will have.

“Not all lenders are on board for the second phase of Help to Buy and of those who are there has been criticism of the high interest rates offered on these mortgages. Raising a five per cent deposit is also no walk in the park and will undoubtedly take time and sacrifice – something some tenants simply don’t want to do.

“We are also building less than half the number of new homes required to subsidise the current demand and therefore even those who are in a position to join the buyer’s market may find themselves with nowhere to go.”

Content correct at time of publication