Philip Hammond has confirmed the Government is closing its Help to Buy mortgage guarantee scheme in the latest of George Osborne’s flagship policies to be abandoned by the new administration.
In a letter to Bank of England Governor Mark Carney, the Chancellor said the scheme was “introduced with a specific purpose that has now been successfully achieved” and it will now be dropped.
Mr Hammond said the scheme will close to new loans at the end of 2016.
Launched in the autumn of 2013, it was described by the then government as a “landmark” scheme that would get thousands of people on the housing ladder.
It meant that buyers only needed to find a deposit of 5% of the value of their home, with a mortgage covering the remaining 95%.
New figures reveal that more than 86,000 households have been supported by the scheme. Government ministers praised the scheme as they announced its closure.
Housing and planning minister Gavin Barwell said: “Today’s figures show that Help to Buy is helping more people realise their home ownership dream by reducing the need for large deposits and getting more new homes built.
“With hundreds of households helped every day through our range of Government-backed schemes, we are building a country that works for everyone and not just the privileged few.”
But the Government said the scheme is no longer needed as confidence has returned to the market, with more private lenders offering 90% to 95% mortgages.
Paul Smee, director general of the Council of Mortgage Lenders, said: “Help to Buy continues to give a welcome leg-up to many creditworthy buyers who may not otherwise have been able to get a foothold on the property ladder.
“The scheme has helped buyers right across the country, including a high proportion of younger borrowers and first-time buyers.
“Mortgages for those with small deposits are now becoming more common outside the scheme and Help to Buy has been a significant help for buyers when they were less readily available.”
In his letter, Mr Hammond said the Bank of England’s Financial Policy Committee has assessed that the move to drop the scheme is “unlikely, in current market conditions, to affect significantly the provision of finance” to Britons hunting for a mortgage.