Chancellor Philip Hammond to close Help to Buy mortgage guarantee scheme at end of 2016

Helen Cahill
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The Help to Buy scheme will close to new loans at the end of this year (Source: Getty)

Chancellor Philip Hammond has confirmed that he will be closing the Help to Buy mortgage guarantee scheme at the end of this year.

In a letter to Bank of England governor Mark Carney, he said the scheme's purpose has been "successfully achieved" and he will close it to new loans at the end of 2016.

Hammond said: "The high loan to value mortgage market has become less reliant on the scheme as confidence has returned.

Read more: Number of mortgages completed through Help to Buy fell in June

"There are now over 30 lenders offering 90-95 per cent loans outside the scheme. This reflects the fact that the scheme was introduced with a specific purpose that has now been successfully achieved, and, as such, I can confirm that it will close to new loans at the end of 2016 as planned. I will inform participating lenders."

As of June, 86,341 mortgages had been secured through the scheme. It offers lenders the ability to get a guarantee on mortgages for borrowers with a deposit of between five per cent and 20 per cent.

Londoners have not been particularly active in the scheme, making up less than five per cent of the total completions.

Patrick Bamford, business development director for AmTrust International, mortgage and special risks, said: "Confirmation of the scheme’s impending closure is a watershed moment in the post-2007/8 recovery of the first-time buyer market.

"It was neither desirable nor sustainable for high loan-to-value (LTV) lending to be carried permanently on Government shoulders, but attention must now focus on ensuring the right commitments and support structures are in place, so that help for aspiring homebuyers with modest deposits remains on the table without building up extra risk in the financial system."

"This move may be a sign that Theresa May's cabinet is shifting away from the sole focus on owner-occupation that marked the Cameron-Osborne years, and is taking a more balanced approach to boosting housing supply across all tenures, as Gavin Barwell hinted in his first speech as housing minister," said Mark Farmer, CEO of Cast consultancy.