Help to Buy Scheme Has Aided More than 27000 People

New data released by the Government shows that Help to Buy is doing its job, assisting thousands of first-time buyers in getting on the property ladder.

New data released by the Government shows that Help to Buy is doing its job, assisting thousands of first-time buyers in getting on the property ladder.

In the first year of the scheme, which started in April 2013, more than 80% of the 27,000 successful applicants have been first-time buyers. It seems that, although Help to Buy is open to everyone, it is those who have struggled to buy their first homes who have really taken advantage of this golden opportunity.

There are various options under the scheme. The equity loan option allows buyers to borrow up to 20% of the value of the property from the Government, thus giving them a much bigger deposit and therefore an increased chance of securing a mortgage. Other options are the Mortgage Guarantee scheme, under which the Government acts as a guarantor for buyers, and the NewBuy scheme, through which approved lenders offer up to 95% loans on new-build properties.

The benefits of Help to Buy have not stopped at creating a new generation of homeowners. Indeed, as Housing Minister Kris Hopkins explains, its popularity is encouraging construction companies to build more homes: “Hard working families are getting the homes they want, while house building is at its highest level since 2007 and climbing”. This suggests that the feared housing shortage crisis might, perhaps, be resolved.

Regardless of this perceived success, however, there has been a public call for caution, amidst fears that the rise in house prices, to which the popularity of Help to Buy has contributed, could create another housing bubble just like the one which burst in 2007. Indeed, three former chancellors – Lord Lamont, Lord Lawson and Alistair Darling – have all expressed concerns that if the scheme continues to be so widely available, the price rises associated with increased demand will lead to the same mistakes in the management of UK housing being repeated all over again.

This view suggests a balance is needed – Help to Buy has clearly been successful in placing home ownership in the reach of many who once thought it impossible, but perhaps it should be scaled back now that the market is on the road to recovery. That’s certainly the view of Lamont, Lawson and Darling, who are calling upon George Osborne to take heed and limit the scheme.

Economists are in two minds, however, with some suggesting that cutting Help to Buy now will stultify regional property growth. Figures show that only 7% of homes purchased under the scheme are in London, suggesting that Help to Buy has been the kick-start that the rest of the country’s housing market has needed, as the capital’s prices continue to soar far above those in the rest of the country. As Martin Beck, the Item Club’s senior economic adviser, says: “Cutting the scheme could risk choking the recovery in housing transactions across the rest of the UK without solving any of London’s issues”.

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