Will the new ‘Help to Buy’ scheme rescue Taylor Wimpey shares?

The 2013 Help to Buy scheme was a huge benefit to Taylor Wimpey (LSE: TW) shares. The government assistance programme helped push the share price from a post-recession low of just 7p all the way up to 200p.

Now, still-new Prime Minister Andy Burnham has just announced a similar scheme to help first-time buyers get on the housing ladder. This caused share prices of British housebuilders to jump by 15%. Is the move going to turn around a battered housebuilding sector? And are Taylor Wimpey shares set for another dizzying climb?

First-home help

So what exactly is the new scheme – labelled ‘Your First Home’? Essentially, it’s very similar to Help to Buy in providing financial assistance for people to buy their first home. The help comes by way of small deposit requirement, a loan to reduce the mortgage size, and an interest-free period too.

The last scheme was very popular, in some years making up over 50% of Taylor Wimpey’s completions. The boom across the housebuilding sector during the 2010s likely would not have happened – at least not to the same extent – without it.

There are differences though. One is that the cash deposit is just 2.5% – the old Help to Buy was 5%. This might mean a higher take-up and more demand for houses.

A second difference is the cost of mortgages. The 2010s was a period of low interest rates and cheap loans – not an advantage expected in the coming years. Mortgages these days look like they’re heading for the 5% mark and perhaps higher.

But maybe the key difference is that Your First Home requires financial contributions from housebuilders. It remains to be seen what form this will take. If developers like Taylor Wimpey are on the hook for a few hefty sums, then this plan might not be the boon the 2013 version was.

Backdrop

The backdrop to this is that it is very much not all sunshine and rainbows in ‘housebuilder world’. Rising input costs – particularly for wages, energy and supply materials – have squeezed margins and put pressure on profits. The war in Iran pushing energy prices and inflation up isn’t helping matters here either.

In Taylor Wimpey’s case, the share price is down 62% from a 2020 high. That’s over £3bn in market value wiped off, losing its FTSE 100 status in the process. A forced change to the dividend policy brought one of the London Stock Exchange’s largest yields down to 4.69%.

Overall, I think Taylor Wimpey is still worth considering in light of a new scheme that could help matters. But potential investors should be aware of the issues that might inhibit any turnaround.

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John Fieldsend does not hold any positions in the companies mentioned.