Most of the people who took advantage of a generous scheme to help first-time buyers onto the property ladder could have purchased a home without it.
That’s according to a damning new report from the National Audit Office (NAO), which also highlighted how Britain’s biggest property developers raked in millions off the back of the flagship scheme.
That’s thoroughly depressing news to hear for taxpayers, who have seen billions of pounds pumped into an initiative that largely seems to benefit those who don’t need the help.
Buying a house? Save thousands by finding the cheapest mortgage
What is Help to Buy?
There are various parts to Help to Buy, some of which have already expired – you can read about the specifics in more detail here.
In short, the scheme aims to help people afford their first home by offering either interest-free loans worth up to 40% of a new property’s value (which is lower outside London), or topping up the aspiring buyer’s savings by up to £3,000.
As you can imagine, that kind of help doesn’t come cheap: the NAO estimates the Government “will have invested up to £29 billion by 2023, tying up cash which cannot be used elsewhere”.
This money is only expected to be freed up by 2031-32.
And of course, Government funding is just a nice way of saying it is taxpayers’ money that’s being put on the line.
Wealthy and housebuilders are the real winners
To date, around 211,000 buyers have bagged Help to Buy loans, which sounds like it’s been a huge help to those who needed it.
However, the NAO found almost two thirds (63%) could have bought a home without the help, while one in 25 who used the scheme earned in excess of £100,000.
So while most people using the scheme didn't need help, it did at least get some people onto the ladder who genuinely couldn’t otherwise have done so.
But even this is debatable.
As loveMONEY writer Joanne Christie points out in this piece, the rapid rise in demand from first-time buyers has dramatically pushed up the price of homes being bought.
“There is even some evidence to suggest those using the scheme are actually paying more than those who are not.
"According to data analysis of 70,000 first time buyers released by property firm reallymoving.com in October 2018, those using Help to Buy were paying an average of £277,968 for their first home, compared with £257,908 for those not using the scheme."
And it gets even worse.
As Help to Buy is targeted at new build properties, Britain’s housebuilding behemoths have absolutely cleaned up.
Persimmon triggered widespread anger when it announced pre-tax profits of £1 billion, adding that half of its sales had come from Help to Buy homes in 2018.
As Mike Amey, managing director of investment firm Pimco, told the BBC, the profit on a house sold by Persimmon had increased “from £20,000 to £60,000” since Help to Buy was introduced.
Compare mortgages: see how much you could save
Let’s boost supply, not demand
We’ve long been critical of Help to Buy, largely because the funds would be far better spent simply building new homes.
As loveMONEY’s Felicity Hannah points out in this lovely article from back in 2017: “We need more homes, not more money with which to buy those homes.
“Imagine that not enough bread is being baked daily in the UK.
“To help people get bread, the Government agrees to provide financial help to households that have saved almost enough for their bread.
“Unless more bread is baked, clearly all that is going to do is encourage people to compete for bread, meaning the price of a loaf rockets.”
While the scheme may have helped increase the number of homes built, the figures available to us today suggest it’s been far more successful in simply inflating prices even higher.
In its conclusion, the NAO’s report stated it was “too early to determine if the scheme had delivered value for money for the taxpayer”.
Others have drawn a decidedly different conclusion.
As Fran Boait, executive director of campaigning body Positive Money, states: “It's now beyond clear that rather than helping those who can't afford to buy a home, Help to Buy has mainly been a subsidy for a housing bubble, benefiting property developers and existing homeowners.”
Has Help to Buy been a success or failure? Share your thoughts in the comments section below.