16 November 2023
If you are covering the final set of statistics related to the Help to Buy equity loan scheme, please see the following comment from Karen Noye, mortgage expert at Quilter:
"This morning the government published its final set of statistics related to the often controversial Help to Buy equity loan scheme. The scheme, in operation from April 2013 to May 2023, played a dual role in the UK housing market. On the positive side, it enabled a significant number of property purchases, with 387,195 properties bought using the scheme, out of which 328,346 were by first-time buyers. This is no doubt significant. This demonstrates the scheme's substantial impact in helping individuals, especially first-time buyers, to enter the housing market. The total value of these equity loans was £24.7 billion, contributing to property sales totalling £109.2 billion, highlighting its considerable influence on the housing sector.
"However, the scheme's impact was not uniformly positive. Its design, which allowed the government to gain a share of the property's appreciation, meant that as house prices increased, so did the government's profit from these loans. This aspect became particularly burdensome for homeowners when they reached the end of their five-year interest-free loan period. With the interest rate initially set at 1.75% and then increasing annually based on inflation, many homeowners faced escalating costs, adding financial strain to what was initially an assistance program.
"Furthermore, the scheme also had significant implications for house builders. By increasing demand for new-build homes, the scheme effectively lined the pockets of these developers. As more buyers were able to access funds to purchase new homes, builders saw an increase in demand, which likely contributed to the rise in house prices. This increase in demand, fuelled by government-backed loans, provided a substantial financial boon to the construction industry. However, this benefit to builders came with the caveat that it may have contributed to inflating house prices, making the market less accessible in the long run.
"While the Help to Buy scheme had clear benefits as illustrated by today’s data its long-term impact includes increased financial burdens for homeowners and a potentially inflationary effect on house prices.
"The scheme's legacy is thus a mix of significant assistance to homebuyers and substantial gains for the government and house builders, alongside the creation of new financial challenges for homeowners as the scheme phased out. The government may once again announce a housing scheme next week in the Autumn Statement and hopefully they can learn lessons from this more than decade long experiment.”