Barratt says 16% of sales ‘at risk’ from new Help to Buy scheme

The government’s changes to the Help to Buy scheme will make it more difficult for people to get onto the property ladder, the UK’s largest housebuilder has warned.

Barratt spoke out publicly against the new version of the scheme, which will start next year, in comments published alongside its annual results this week.

The changes to the Help to Buy scheme come into effect in April 2021.  

It will be restricted to first-time buyers and there will be regional caps on the value of homes that can be supported, ranging from £186,100 in the North-east to £600,000 in London.

The firm’s chairman, John Allan, said the issue was concerning becuase there had been a reduction in the high loan-to-value lending that many people require to get onto the housing ladder., which had arisen post COVID-19, reflecting a response to a perceived increase in risk and high levels of demand. He said: ”The restriction and removal of Help to Buy will exacerbate this.”

He added: “It is important that lenders and the Government consider what further options are available to help potential first time buyers who want to purchase their own home.” 

In a presentation accompanying the annual results, Barratt revealed that 35% of its sales over the last year had been supported by Help to Buy, and that nearly half of these would not have been eligible under the new criteria. This accounted for 16% of all its sales last year.

The presentation also made clear that not a single major mortgage lender was now offering mortgages on new build properties at more than 85% loan-to-value.

This comes after the past few months which have seen many mortgage providers stop giving mortgages to people with small deposits. 

The news came as Barratt revealed the impact of covid-19 on its business, suffering a major drop in turnover and profit in the year to June 30. Revenue dropped by 28% and profit before tax fell by almost half - from £909.8m to £491.8m.

The company’s chief executive, David Thomas, said: “Prior to the pandemic the availability of both 95% LTV lending and the Government’s Help to Buy scheme provided invaluable help for those seeking to get onto the housing ladder. Today there are no mainstream mortgage lenders providing mortgages at 95% LTV for new build homebuyers.”

He said the new regional price caps “will prove restrictive for many, particularly those looking to purchase new homes in parts of the North and the Midlands where the price caps create significant limitations on the choice of new housing available within the new scheme.”

Thomas added: “During FY20, 46% of our purchasers who used Help to Buy would not qualify for the new Help to Buy scheme.”

This comes amid concerns over the length of time it will take housebuilders to become approved to take part in the new scheme, revealed by  Housing Today. Firms may not be able to get approval before the end of the year, and this could lead to a hiatus in sales, according to trade body the Home Builders’ Federation.