MPs have expressed uncertainty over the value of the Help to Buy scheme in both its current and soon-to-be reformed version.
A report by the House of Commons committee of public accounts warns that while the scheme has helped buyers on to the property ladder, a “large proportion” did not require financial help.
The report said: “While Help to Buy has helped many people to buy properties who otherwise would not have been able to, a large proportion of those who took part did not need its help.
“By December 2018, the scheme had supported some 211,000 households to buy properties, through loans totalling £11.7bn.
“Some 37% of buyers said they could not have bought a property at all without the support of the scheme.
“This implies that around three-fifths of buyers did not need the support of the scheme to buy a property, although some research suggests that even those who could afford to buy were not doing so because of wider economic uncertainty.
“Around 20% of people who have used the scheme were not first-time buyers.”
The committee warns that the Government has allowed the scheme to be a “semi-permanent feature” of the housing market since its launch in 2013, highlighting that there are no plans to address a fall in supply when the scheme is due to end in 2023.
The report also questions reforms to the scheme. From 2021, the ministry will restrict the scheme to first-time buyers, and is introducing lower regional price caps that will reduce the number of purchases through the scheme and should better focus the scheme on those who most need help.
The report said: “Regional price caps could mean that the scheme may not work well in some areas within the regions.
“While the [ministry] has committed to monitoring the situation, having already set the caps, it seems unwilling to change them, creating a risk they may not work in the way intended.
“Despite this, the [ministry] has not assessed the likely impact of the changes to the scheme from 2021.”
There are also warnings that borrowers may be unaware of the extra interest charged on the equity loan after five years.
The Ministry of Housing, Communities and Local Government is urged to report back on the value and workings of the new scheme before it is launched.
Meg Hillier, chair of the committee, said: “Help to Buy has certainly increased the supply of new homes and boosted the bottom line of house builders.
“But it has also tied up a large sum of money, forecast to be nearly £29bn in cash terms by the time it concludes in 2023, making the value of what has been achieved uncertain.
“While many people have been helped to buy properties who would have not otherwise been able to, an even larger group of buyers did not need its financial support.
“Help to Buy, as the department acknowledged, only benefits those in a position to buy their own house in the first place. It does not help make homes more affordable nor address other pressing housing problems in the sector such as the planning system or homelessness”.
“The scheme exposes both the Government and consumers to significant financial risks were house prices or interest rates to change.
“Better consumer protection needs to be built into similar schemes in the future.”
Comments (6)
Can anybody explain what the difference is between this scheme and what Northern Rock were doing. We have been involved with a few valuations of people that have used Help to Buy and they all have a bit of Negative Equity. None had saved any money to pay off what they owe when the initial term expires. Which is hardly surprising when most are young people, with new families and heaps of student debt. This will end in disaster.
“Help to Buy” is a UK Govt, economically illiterate, politically driven, Answer in search of a Question!
Known among house builders as the HELP TO SELL Scheme, it has & continues to cost taxpayers £bns in mortgage support & subsidies, nominally provided to purchasers at the lower end of the hsg open mkt.
It probably initially gave a one off advantage for a short period of time to the 1st wave of purchasers. As mkts quickly adjust, PRICES in each sub-mkt RISE to absorb such changes so that benefits accrue to LANDOWNERS & DEVELOPERS not purchasers.
Hse prices are determined by MONEY SUPPLY available to marginal purchasers in each sub-mkt. Subsidies/tax reliefs raise MS & PRICES. It sounds good POLITICALLY but will be impossible politically to remove AFTER the mkt has adjusted.
Alternatively, the mkt will suffer a shock & value loss to OWNERS in the sector, if the subsidies are ever removed after the mkt has factored them in.
Whilst taxpayers’ money is squandered raising the PRICE LEVEL, particularly in the 1st time buyer sub-mkt, existing holders of land & owners, such as mass house builders, gain SUPER NORMAL profits & wealth, possibly evidenced by the salaries & profit related bonus paid to senior executives.
The scheme should be renamed as “Help to Make Big Builders Richer”
More worrying is the price these people are paying for the property when using this ponzi scheme.
As usual only new home builders benefitting.
People getting 20% discounts but still paying 20% more then a second hand property in the same area.
Who’d have thought it.
Agreed…. I can see this being the next “mis-selling” scandal with a class action against the government when 000’s are stuck in negative equity. This is the next PPI not floorplans!
They will no doubt ‘learn from their mistakes.’. and not give a tosh