The Government has scrapped the Help to Buy mortgage guarantee scheme.
In a letter to Bank of England governor Mark Carney, chancellor Philip Hammond said its purpose had now been achieved after three years.
The government will continue to offer the Help to Buy equity loan scheme, which was extended to 2020 by former chancellor George Osborne.
From 17 September: Help to Buy: an unhealthy over-reliance?
Help to Buy was launched by former chancellor George Osborne and let buyers raise just 5% of deposit, with the government guaranteeing mortgage lenders the rest – effectively giving them an extra 20% spending power.
Hammond said that over 30 lenders now offered 90-95% loans, meaning Help to Buy could now close to new loans at the end of 2016 as planned.
Some housebuilders had called for it to continue.
A Jefferies note said it “appears as instrumental to housebuilder’s success as the National Lottery is to our Olympians” with some major builders saying it contributed toward 30-40% of their sales.
Mark Farmer, CEO of Cast consultancy, said: “Help to Buy undoubtedly gave the house building industry a much needed shot in the arm it needed as it emerged from the depths of the financial crisis but stimulating housing demand in this way is always risky.
“Many have argued that these schemes bring artificially high numbers of people into ownership through high loan to value arrangements and subsidised mortgages. This carries risk of inability to service such a loan in a higher interest rate environment in the future or people become engulfed by negative equity.”
David Fenton, partner at Knight Frank, said last week: “If you took Help to Buy away, you would ultimately slow the amount of plots being built per year.
“I think it would lead to a significant development volume reduction. It would not be an intelligent thing to do, when we are trying to build.”
