The government’s Help to Buy scheme finishes at the end of 2016 and should be replaced to ensure competition in the housing market.

According to the Intermediary Mortgage Lenders Association (IMLA) that represents mortgage lenders marketing their products through brokers and advisers, the housing market's needs a permanent replacement for the Help to Buy scheme.

The Help to Buy mortgage guarantee scheme has increased competition and given more choice to first time buyers and home movers with mortgages up to 95% loan to values (LTV).

Of the IMLA members 65% believe that failing to replace this with a permanent mortgage indemnity scheme would mean home ownership would suffer.

Help to Buy scheme needed

The government started Help to Buy in 2013 to support first time buyers and home movers who could afford a mortgage but did not have a large enough deposit following the financial crisis.

Help to Buy is not available to remortgage buyers or buy-to-let landlords.

About 80% of the 80,000 completed schemes are first time buyers with an average price of £185,000 and 94% of these have been outside of London.

In addition there is also a Help to Buy loan scheme until 2020 for those buying new build properties which increases the completed schemes to over 90,000.

Research from the IMLA found that 75% of brokers and 65% of lenders would expect the number of first time buyers would reduce if the Help to Buy is not replaced after 2016 and home ownership would suffer.

The only option for some remortgage buyers is to stay in their existing home and continue saving more for a bigger deposit unless they have help from family members.

Housing market has been revived

Peter Williams, the Executive Director of IMLA, has said “the Help to Buy mortgage guarantee has breathed new life into the market and opened the door to more prospective homeowners without sacrificing standards when it comes to affordability checks”.

The scheme has encouraged more lenders to offer 95% LTV mortgages outside of the Help to Buy scheme.

Even so homeownership particularly among young people continues to fall and as house prices rise first time buyers are required to have larger deposits.

Family members can help home movers where equity release buyers access wealth using a lifetime mortgage and give to a child or grandchild as an extra deposit to buy their second home.

The housing market must have a long term replacement for Help to Buy that will enable more activity and promote a more inclusive housing market without sacrificing financial stability, says Mr Williams.

Bank of England’s Financial Policy Committee (FPC) has indicated that it would intervene to scale back Help to Buy if the market was overheated.

The IMLA would expect any action to be backed by strong evidence and a full consultation rather than a sudden intervention in order to create a stable housing market and support for first time buyers.

What are your next steps?

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