News: Third of Help To Buy users don’t need the scheme

News: Third of Help To Buy users don’t need the scheme

Another Lincolnshire Highlights news story…

A big portion of home buyers who used the government’s Help To Buy scheme would have been able to purchase a house regardless, according to a spending watchdog.

The National Audit Office (NAO) said that around one in 25 users of the scheme had household incomes of over £100,000.

The NAO also found that the government’s scheme, which is an equity loan, has been instrumental in driving profits for large developers.

The report also found that it was too early to say whether the initiative has provided any value so far.

Five firms combined accounted for just over half of sales in England which used the scheme over the last five years.

These firms, Redrow, Bellway, Taylor Wimpey, Barratt, and Persimmon, are apparently better equipped to administer the scheme according to the NAO’s analysis.

Redrow made up 3.7% of sales, Bellway accounted for 6.7%, Taylor Wimpey made up 11.9%, Barratt made up 13.3% and Persimmon accounted for 14.8%, according to the NAO’s analysis.

New build homes are the only properties eligible for the scheme
(Image: Copyright Unknown)

The NAO reported that the challenge was now for the property market to be weaned off the scheme, which launched just over six years ago.

Research found 37% of households would not have been able to buy any property without the scheme.

But nearly a third (31% ) of buyers could have purchased a property they wanted without the scheme.

Some buyers could have bought a property without the support of Help To Buy, but not necessarily a property they wanted.

Around 4% of the 211,000 buyers who had used the scheme by December 2018 had household incomes of over £100,000.

Over the whole scheme, which is not means-tested, 10% of buyers had household incomes of over £80,000.

‘A subsidy for a housing bubble’

Commenting on the report, Fran Boait, executive director of campaigning body Positive Money, said: “It’s now beyond clear that rather than helping those who can’t afford to buy a home, Help To Buy has mainly been a subsidy for a housing bubble, benefiting property developers and existing home owners.”

The NAO’s analysis found that buyers who had used Help To Buy had paid just under 1% more than they might have paid for a similar new-build property bought without the support of the scheme.

New build houses in Cheshire

By 2023, the net amount loaned through the scheme is forecast to peak at around £25 billion, with the investment expected to be recovered by 2031/32 and a positive return made overall.

But the NAO said the investment was exposed to significant market risk as it was sensitive to house price changes and the timing of buyers repaying loans.

It said there was also a cost in terms of opportunity in tying up money for a considerable period, rendering it unavailable for other housing schemes or priorities.

No fees for the first five years

The scheme was launched by what is now the Ministry of Housing, Communities and Local Government.

Home buyers receive an equity loan of up to 20% (or 40% in London) of the market value of a new-build property. They are not charged loan fees on the loan for the first five years of owning their home.

Redrow is building 42 new homes in Wigston
Redrow properties in the East Midlands

Between the start of the scheme in April 2013 and September 2018, 38% of all new-build property sales were supported by loans through the scheme, accounting for around 4% of total house purchases across England during this time.

Around 81% of all buyers supported by the scheme were first-time buyers.

It was announced in 2018 that from April 2021, the revised scheme would be restricted just to first-time buyers, with lower regional limits on the maximum house purchase price.

Scheme to end in 2023

The NAO said changes to the scheme aimed to reduce overall demand for it in its final two years, preparing the housing sector for its end in 2023.

Take-up of the scheme had been lower in London, where average house price-to-earnings ratios were higher, compared with the rest of England, the NAO’s report said.

Gareth Davies, head of the NAO, said: “Help To Buy has increased home ownership and housing supply, particularly for first-time buyers.

“However, a proportion of participants could have afforded to buy a home without the Government’s help.

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“The scheme has also exposed the Government to significant market risk if property values fall, as well as tying up a significant public financial capacity.

“The Government’s greatest challenge now is to wean the property market off the scheme with as little impact as possible on its ambition of creating 300,000 homes a year by 2021.

“Until we can observe its longer-term effects on the property market and whether the department has recovered its substantial investment, we cannot say whether the scheme has delivered value for money.”



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