Extract from an article by David Kingman
Following the recent release of some new data on the use of the government’s Help to Buy scheme, David Kingman looks at whether it is really having a significant impact on would-be homeowners.
Some new data recently released by the Department for Communities and Local Government (DCLG) and analysed by the BBCshow that during the first three years when it was in operation (from September 2013 to September 2016), the government’s Help to Buy: Equity Loan scheme was used to purchase just over 100,000 properties (100,284 to be exact). Now that it has been in operation for a significant amount of time, it is possible to take an informed view of whether it is really addressing the UK’s housing crisis or not. This article takes a look at the available evidence.
Help to Buy
The Help to Buy: Equity Loan scheme was launched by the then-Chancellor George Osborne in his 2013 Budget as a way of boosting the number of people who could afford to access home ownership. The scheme works by loaning the would-be buyer 20% of the value of their prospective property (or up to 40% in London), so that they only need to raise a 5% deposit for themselves up front (they borrow a commercial mortgage to cover the remainder). The government loan comes with relatively favourable terms, as borrowers don’t have to make any repayments during the first five years of ownership, but they are expected to pay it back after that.
The recently released data show that over three-quarters of the properties which have been bought using Help to Buy loans since 2013 have been outside London, where the total number of Help to Buy properties is equivalent to almost one in three of the newly built housing stock during this period. The use of the scheme within London, however, was much lower, although the number of Help to Buy properties bought in London since September 2013 has still been equivalent to one in ten of all the newly built housing during that period.
The data show that 80% of the people who bought homes using Help to Buy were first-time buyers, and the average purchase price they paid was £229,608. In total, the government’s investment in the scheme is worth £4.6 billion…(continues)
SOURCE: David Kingman, “How many people are really benefiting from Help to Buy?”, Intergenerational Foundation, 24 Feb 2017
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