Source: Sharecast
The policy, dubbed ‘your first home’, is intended to help buyers who can afford mortgage payments but would either struggle to pay the deposit or do not have financial support from families. Under the scheme, first-time buyers would get a 20% equity loan to help buy new build properties, with an initial interest free period and a small 2.5% deposit. Further details are expected to be included in chancellor John Healey’s first Budget, on 28 October.
Further buoying sentiment was confirmation a day later that the government also planned to simplify the takeover of empty homes by councils, to enable them to be used for people most in need.
As a result, the housebuilding sector soared when trading got underway on Monday. Barratt Redrow topped the FTSE 100 risers board, rocketing 14% at 351.85p by 0900 BST. Kitchens supplier Howden Joinery Group also spiked, up 5% at 797p.
Outside of the top flight, and Persimmon surged 15% at 1,321.5p, Taylor Wimpey jumped 14% at 91.37p, Bellway was 13% stronger at 2,346p while Berkeley Group Holdings sparked 3% at 3,462p. Even under-pressure Vistry, which has seen its share price plunge over the last year, was 12% higher at 292.5p.
Construction specialists also benefited, with Travis Perkins up 10% at 657p and Breedon Group 9% ahead at 335.1p.
Peel Hunt said it would expect around 20% of deals to be supported by the scheme and a 10% uplift in volumes in 2028.
Richard Hunter, head of markets at Interactive Investor, said: "The housebuilding sector has been beleaguered by a raft of headwinds, ranging from higher mortgage rates and strained affordability to a slow planning process for new homes, and the announcements have provided a rare and overdue relief rally from investors."
Neil Wilson, investor strategist at Saxo UK, said: “Whatever the finer details, this is an unambiguous win for the industry and some relief for investors in these beaten down stocks.
“Persimmon stands out as the most likely to benefit from a Help to Buy revival, thanks to its lower average selling prices and exposure to first-time buyers, particularly in the north. Berkeley is seen benefitting the least due to high average selling prices, while Vistry’s recent strategic overhaul leaves it in a much better position to benefit, as most completions will be in future sold on the open market.”
Help to Buy was introduced by the then Conservative government in 2013 and ran for 13 years. Consisting of a mortgage guarantee and equity loan, it was designed to help first-time buyers get on the property ladder. However, critics said the scheme pushed up house prices and boosted housebuilder's profits while failing to address underlying structural issues in UK property market.