Watchdog slams Help to Buy scheme

Around two thirds of home buyers could have bought a property without the support of the government’s Help to Buy scheme, according to the National Audit Office (NAO).

In a new report, the watchdog claims the government’s own research shows just 37% of households would not have been able to buy any property without the aid of the scheme.

While 31% said they could have bought a property they wanted without any assistance from the programme.

Under Help to Buy, the government lends up to 20% of the cost of a newly-built property – or 40% within Greater London – so buyers need only a 5% deposit and a 75% mortgage to buy a home.

The loan must be paid back in full on sale of the property, within 25 years, or in line with the buyer’s main mortgage if this is extended beyond 25 years.

According to the NAO, Help to Buy made around 211,000 loans amounting to £11.7 billion by December 2018.

Between the start of the scheme in April 2013 and September 2018, 38% of all new-build property sales have been supported by loans through the scheme, which is around 4% of all housing purchases during this time.

The report adds the net amount loaned through the scheme is forecast to peak at around £25 billion in cash terms by 2023.

In February, the leader of the Liberal Democrats, Vince Cable called for the scheme to be scrapped after one of Britain’s largest homebuilders announced pre-tax profits of more than £1bn.

At the time, Persimmon Homes had just posted made pre-tax profits of £1.09bn last year, up 13% on 2017 when it posted pre-tax profits of £0.9bn.

‘Help to Buy has increased home ownership and housing supply, particularly for first-time buyers,’ said NAO head, Gareth Davies.

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

‘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,’ added Mr Davies.

‘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 from the mid-2020s. 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.’

Photo by Mastersenaiper (Pixabay)