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Government spends £11.71 billion on Help to Buy 02/05/2019 Labelled as Finance

Latest figures show that in the period between 1 April 2013 and 31 December 2018, 210,964 properties were bought with the help of the Government's Help to Buy Equity Loan and the value of those loans was £11.71billion.


With a Help to Buy Equity Loan, the Government lends up to 20% of the cost of a newly built home, the purchaser finds a 5% cash deposit and a 75% mortgage to make up the rest. In London, the maximum equity loan was increased from a maximum of 20% to 40% from February 2016.


A Help to Buy Equity Loan is a Government financial assistance which allows eligible applicants to purchase homes through a Government equity mortgage secured on the home. The purchaser receives a public subsidy in that they are not charged loan fees on the Help to Buy Equity Loan for the first five years of owning the home.


The Help to Buy Equity Loan Scheme can be used to purchase new build properties up to the value of £600,000 with a maximum equity loan of £120,000 (20%). In Greater London the maximum equity loan is £240,000 (40%).


171,053 (81%) of the home purchases were made by first-time buyers using a total of £9.31 billion equity loans.


The average (mean) purchase price of a property bought under the Scheme was £258,223 with a mean equity loan of £55,498. Only just over half (57%) of the homes purchased under the Scheme to 31 December 2018 had a purchase price of £250,000 or less.


58% of first-time buyers using the Scheme to purchase a property had household incomes ranging between £20,000 and £50,000. However, of the 210,964 cumulative completions to 31 December 2018, 58,124 purchasers (27%) had total household incomes of greater than £60,000.


Read the full statistical release

The existing Scheme has been criticised in some quarters amid concerns that it fuels new build house price increases and is poorly targeted, being open to purchasers on relatively high incomes. There are also concerns that if we see significant house price deflation this could lead to a significant increase in negative equity and defaults on mortgage repayments - particularly if house price deflation coincides with the end of the purchasers' 5-year interest free equity loan.


The Chancellor's 2018 Budget Statement contained an announcement that a new Help to Buy Equity Loan Scheme will replace the existing Scheme and will run for two years from April 2021 at the end of the current Scheme and the current Scheme will then close. Unlike the existing Scheme, the new Scheme will be available for first-time buyers only and for houses with a market value of up to the new regional property price caps set at 1.5 times the current forecast regional average first-time buyer price. The caps range from £186,100 in the North East to £600,000 in London.


ARCH has long argued that any Help to Buy Scheme should be restricted to first-time buyers on lower incomes who are unable to access the owner-occupied market and cautiously welcomed the Chancellor's announcements of changes to the Scheme in the 2018 Budget, but also argued that the Government should at least match the investment in Help to Buy by investing in the supply of new social rented housing. 

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