As the government's Help to Buy scheme winds down with full closure in 2023, Freddie Scarratt examines whether a private sector solution called Deposit Unlock can fill the void that will be left.

The government’s Help to Buy scheme, which has so far funded 339,3471 new homes, has been the driving force behind high loan-to-value (LTV) new build lending for the past 7 years. Given Help To Buy’s restriction to first-time buyers and region price caps in 2021, a group of 17 developers commissioned Gallagher Re to design, initiate and implement a private sector solution to galvanise the high LTV lending space and fill the void that has been left behind by Help to Buy. A void we believe will only get bigger from second half of 2022 as sales wind down for the scheme's closure in 2023.

Deposit Unlock enables first time buyers and existing homeowners to purchase a new-build home with a 5.0% deposit at competitive interest rates. This is achieved via an innovative insurance-led solution that was collaboratively built with lenders and the house building industry, led by the trade bodies Home Builders’ Federation and Homes for Scotland.

Given the volume of sales since 2013, the Deposit Unlock solution has been welcomed by the lending community, with Newcastle Building Society leading the way with a pilot launch in June 2021. In October Nationwide Building Society, the UK’s 2nd largest lender2, announced their plans to join, leading to a full scheme roll-out and launch in November 2022.

However, can Deposit Unlock fill 60,6343 per year left by Help to Buy? Savills recently published a report which states that the scheme can deliver 24,451 properties per year from 2023, of which 19,000 will be those who would have joined the HTB scheme. Savills stated that Deposit Unlock “has the potential to help that substantial proportion of Help to Buy users to continue buying new homes”4.

Can Deposit Unlock help fill the void left by Help to Buy?

Deposit Unlock has therefore been highlighted as the dominant scheme to replace sales in a post Help to Buy market in 2023. We believe the reasons for these are two fold; firstly the scheme offers lenders huge amounts of free protection on a per property basis, allowing them to comfortably lend at 95% LTV on new builds with extremely competitive interest rates. Secondly, it is simply a normal mortgage from a consumer’s point of view. This simplicity will help drive both first time buyers and home movers to the scheme with a particular focus for those without the Bank of Mum & Dad given the need for just a 5.0% deposit.

Freddie Scarratt is a Director, Mortgage Solutions, Gallagher Re

For more information please visit: https://www.hbf.co.uk/deposit-unlock/

  1. DLUHC Help to Buy Data to 30 June 2021
  2. UK Finance Largest Mortgage Lenders: https://www.ukfinance.org.uk/data-and-research/data/mortgages/largest-mortgage-lenders published on 8/6/2021
  3. DLUHC Help to Buy Data: July 2020 to June 2021
  4. Savills. Support for new homes sales: life after Help to Buy. 26th January 2022