Editor's note: This brief was summarised by The Property AI Newsroom from a report by Mortgage Solutions. Read the original article for full details.
Most Help to Buy buyers could have purchased without scheme, review finds
A government evaluation of the Help to Buy scheme has found that most customers could have bought a home without it. Mortgage affordability analysis showed 78% of Help to Buy 1 customers and 62% of Help to Buy 2 customers would have been able to buy a local average first-time buyer property without the scheme's support.
Additional buyers and survey findings
That left 22% of Help to Buy 1 users and 38% of Help to Buy 2 users as "additional" homeowners who could not have purchased without the support. Qualitative survey data painted a different picture, though: 46% of customers said they would not have been able to buy a home without the scheme, while the remaining 54% said they could have bought a suitable property anyway but used the support to purchase a larger or higher-quality home.
Lenders and developers told researchers it was common for buyers to use Help to Buy to purchase bigger homes than they could otherwise afford, effectively "skipping a rung" on the housing ladder. In London, only 31% of Help to Buy 1 customers could have afforded an average local first-time buyer property without the scheme, and the evaluation found little evidence of increased homeownership in areas that were already relatively unaffordable before the scheme was introduced.
Objectives met despite mixed picture
Despite these findings, the evaluation concluded that Help to Buy achieved its main objectives of increasing homeownership and boosting housing supply. The report found the scheme increased access to mortgage finance and supported higher levels of first-time buyer mortgage sales in England.
Customers said the equity loan helped them secure lower monthly repayments and more favourable mortgage rates, particularly under Help to Buy 1 when interest rates were lower. Some borrowers, however, reported having fewer lender options because only certain banks would lend on Help to Buy properties.
On repayments, 94% of customers paying interest said they were up to date, though administrative data showed the figure was slightly lower at 91%, suggesting some borrowers may not have realised they were in arrears. Customers with children and those facing financial difficulties were more likely to have missed payments.
Warning over a revived scheme
Chris Lee, former director of the Help to Buy scheme and CEO of Own Homes, said bringing back the scheme would be a mistake. He argued that many aspiring buyers can afford the ongoing cost of homeownership but are locked out because they cannot build a large-enough deposit while paying high rents, and that any future version of the scheme needs to be more flexible and designed around today's deposit barrier rather than simply recreating the old model.
Customer satisfaction was broadly positive, with more than seven in 10 customers satisfied or very satisfied, though 17% reported dissatisfaction, most commonly over customer service and the complex, stressful process of repaying the equity loan.
Source: Mortgage Solutions