Is Help to Buy costing new homeowners more?

The government?s Help to Buy scheme was launched in 2013 to boost housebuilding and help generation rent onto the housing ladder. However, new research shows that people using scheme may actually be paying a premium – and that they may have been able to get on the housing ladder without it.

Conveyancing firm Reallymoving analysed data from 40,000 first-time buyers over the year to September 2019. The researched showed that those using Help to Buy, paid on average 10% more than those who funded their purchases without the scheme. The figure in London was higher at almost 12%, however, in Yorkshire and the West Midlands it was more than 21%.

The study follows the release of figures from housebuilder, Barratt, which revealed that 40% of its business comes from Help to Buy customers.

New builds generally attract a premium price and can subsequently lose value, meaning that first-time buyers using the scheme are at risk of negative equity.

Critics also believe that the popularity of Help to Buy has led developers to inflate prices and that the scheme could have a negative impact on the overall housing market.

Reallymoving chief executive Rob Houghton said: ?Most first-time buyers find it difficult to raise a deposit and as a consequence they are being cornered into the new-build sector, where homes already command higher prices, before paying an additional premium on top if they need to use a Help to Buy Equity Loan.

?In many cases they simply don?t have the deposit required to explore other options such as buying a second-hand home, which may offer considerably better value.?

How help to buy works

Opening a Help to Buy ISA means the government will add 25% to the amount saved, up to a maximum of ?3,000 on savings of ?12,000, if used as a deposit on a first home.

The deposit can be used to buy a property using a Help to Buy: Equity Loan, where the government lends 40% of the cost of a new-build home in London (or 20% elsewhere). The loan is interest free for five years. A Help to Buy: Shared Ownership scheme allows the purchaser to buy a share of the home (between 25% and 75%) and pay rent on the remainder.

Applications for a Help to Buy ISAs close on 30 November this year, and prospective homeowners have been encouraged to open an account now, to ensure they can take advantage of the scheme ? including by Money Saving Expert founder, Martin Lewis.

Read more about this story in The Stylist.

Tags: property
Posted in ASR News