Posted Oct 9, 2023
In this blog post, we will look at the government Help to Buy scheme, which had a significant impact on the housing market in England.
We will explore the success of this government scheme through statistics, key facts, and various aspects of the scheme. Whether it helped you as a first time buyer or you are simply curious about the scheme, this article will shed light on its achievements.
What was the Help to Buy Scheme?
The Help to Buy Scheme was a government scheme that was introduced to help first-time buyers onto the property ladder. It includes equity loan, shared ownership, ISA, and mortgage guarantee schemes. These involved the government offering a loan to buy a share of a new-build property or contributing to the purchase price, reducing the amount of mortgage required.
Help to Buy Equity Loan
This Help To Buy Equity Loan scheme was closed to new applicants in October 2022 and ended in March 2023, but it is still available in Wales. The government provided a loan of up to 20% of the home's value (40% in London), which was interest-free repayment for the first five years. The buyer needed to contribute at least 5% of the property price as a deposit. The government published a handy homebuyers’ guide to the Help to Buy: Equity Loan which explained the process and the terms and conditions for the loan.
Help to Buy ISA
The scheme is no longer open. The Help to Buy ISA was a savings account where the government would boost your savings by 25%. For example, for every £200 saved, you’d receive a government bonus of £50. The maximum government bonus received could be £3,000. It's crucial to note that this scheme closed to new accounts at midnight on 30 November 2019.
Help to Buy Eligibility
The scheme was open to both first-time buyers and homeowners looking to move to a new property. The property price had to be within certain limits, varying depending on the region.
Regional Differences: In London, the maximum equity loan percentage available was 40% of the property's value, whereas in other parts of England, it was 20%. This regional variation allowed for greater flexibility based on housing market conditions.
Help to Buy (Equity Loan Scheme) Key Statistics
Legal completions and value of equity loans (Q2 2013 - Q1 2023)
- There were 387,091 completions with equity loans valued at £24,708.51 million on completion.
- The total value of properties sold was £109,170.24 million.
Value of equity loans for first-time buyers in England (Q2 2013 - Q1 2023)
- The total number of completions was 328,242
- The value of equity loans at completion amounting to £20,939.77 million.
- The overall value of properties sold stands at £90,460.64 million.
Purchase price for buyers
There were 58,849 sales to those who have bought before (non-first time buyers) and a much larger number, 328,242 sales, to first-time buyers.
- Most properties sold fell within the £250,001 - £350,000 price range. In total across all price ranges and buyer types, there were 387,091 property sales.
The Help to Buy: Equity Loan scheme had a price cap of £600,000 for a property purchase.
Property type for buyers
Below are the percentages of property types for all completions:
- Flats and studios - 21%
- Detached - 29%
- Semi-detached - 33%
- Terraced - 17%
Deposit levels for purchasers
- Deposits up to 5% were most common among all purchases, accounting for over half (54%).
Household income under Help to Buy
In all of England:
- The average (mean) income for all applicants was about £55,000.
- First-time buyers earned, on average, around £54,000.
- Non-first-time buyers had a higher average income at approximately £60,000.
- All applicants had an average income near £70,000.
- Both first-time and other buyers earned roughly the same amount on average (£70k+), which was more than outside London.
Excluding London from the rest of England:
- The overall average income dropped to just over £53,000.
- First-time buyers' incomes were lower than those including London figures.
These numbers show that people that applied in London have higher incomes compared to those elsewhere in England.
Source data for the key statistics above can be found on the government website.
Was Help to Buy a Success?
This is subjective and can depend on individual experiences. It certainly helped to increase the number of first-time buyers. However, there have been criticisms, for example that it inflated house prices.
The Help to Buy scheme played a crucial role in increasing homeownership rates across England. It provided affordable financing options for people who would otherwise have struggled to save for a sizable deposit.
Boost to the Housing Market
The scheme injected much-needed liquidity into the housing market, stimulating demand and incentivising construction. This resulted in a positive impact on the overall economy. It also increased employment opportunities in the construction sector.
Help to First-Time Buyers
The Help to Buy scheme specifically targeted first-time buyers, allowing them to step onto the property ladder with lower down payments. This initiative fulfilled the aspirations of many young individuals and families who were determined to own their own homes.
The scheme had a notable impact on regional development, particularly in areas with significant housing demand. It encouraged developers to create new housing projects, ensuring a steady supply of affordable homes for potential buyers.
What affordable home ownership schemes are still available?
Shared Ownership Scheme: The shared ownership scheme involves a housing association owning part of the property. It is suitable first-time buyers who cannot afford the mortgage on 100% of a home. You to buy a share of a home (usually between 25% and 75%) and pay rent on the rest. It provides an opportunity to buy more shares at a later date, which is known as 'staircasing'.
The Lifetime Individual Savings Account (ISA) is a scheme introduced by the UK Government to help young people save for their first home or retirement. It's available to individuals aged 18-39. You can save up to £4,000 each tax year, and the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. The funds can help buy your first home, or for later life (once you turn 60).
This scheme is available until the end of December 2023 because of an extension. This involved the government offering lenders the option to purchase a guarantee on a mortgage loan. If the homeowner defaulted on the loan, the government would cover a portion of the losses.
A type of discounted market sale housing that meet the definition of 'affordable housing' for planning purposes. They are sold at a minimum discount of 30% against the market value and must be sold to individuals who meet the First Homes eligibility criteria. The first sale of a First Home should be priced no higher than £250,000 (£420,000 in Greater London) after the discount has been applied.
The Help to Buy scheme really helped the housing market in England. It significantly impacted the lives of those looking to buy a home.
Although the scheme is now closed for new applicants, its success helped so many first-time buyers to own their own home and get on the property ladder.
Frequently Asked Questions
Is the Help to Buy scheme still available?
Unfortunately, the Help to Buy scheme is no longer available for new applicants. The government closed the scheme for new loans in March 2023. However, existing participants can continue to benefit from their existing equity loans.
How did the equity loan work?
The equity loan in the Help to Buy Scheme allowed buyers to borrow up to 20% of the cost of a newly built home, so they only needed a 5% cash deposit and a 75% mortgage to make up the rest.
They did not charge any fees for the loan amount in the first five years, but in year six, they started charging a fee of 1.75%, which increased annually by the Consumer Prices Index plus 2%.
Did the scheme impact property prices?
While the Help to Buy scheme did seem to contribute to increased demand and resulted in some price inflation in certain areas. Its primary focus was on facilitating access to homeownership rather than influencing market prices.
Who was eligible for the Help to Buy scheme?
The Help to Buy scheme was open to both first-time buyers and existing homeowners looking to purchase a new property. The property's price had to be within specific limits and it varied depending on the region.