Author Mark Fairlie

Prime Minister Theresa May has announced that the government will introduce £10bn into a new phase of the Help to Buy scheme, reports the BBC.

The average age of first-time buyers across the UK has risen to the age of 30 (Halifax statistics) as the increasing prices people are paying for homes have meant that first-time buyers need to find bigger deposits to fund their purchase.

As house price inflation continues, the Resolution Foundation reported that only half of millennials are on track to buy a home before they reach the age of 45. Supporters of Help to Buy say that the scheme is there to address the problem of lack of affordability.

What is Help to Buy?

Help to Buy scheme

The scheme was first introduced in England in 2013.

For homebuyers using the scheme, they only need to find 5% of the value of a property as a deposit. The government will then offer a 20% equity loan (40% in London) on top meaning that purchasers accumulate, in effect, a 25% deposit (45% in London) for their home.

Users of the scheme can only purchase newly-built homes up to the value of £600,000.

When the buyers come to later sell the property, the government recovers the loan amount in full and makes a profit by taking part of the additional equity if the value of the property has risen.

According to the Homebuilders Federation, 200,000 people used Help to Buy to purchase a newly-built home in the four years that the scheme has been running.

Opinions on Help to Buy

Help to Buy recipients argue that it has allowed them to get their feet on the property ladder and without it, they would not have been able to make their purchase. BBC News reported that one in three new build properties outside London were bought with Help to Buy.

Reacting to that figure, Gavin Stewart, sales director at Barratt London, told the BBC that the scheme has proved an “effective way … to get (first-time buyers) on the property ladder.” The Financial Times reported that Help to Buy had added £1bn to housebuilder valuations.

Stephen Barclay, the Treasury economic secretary, told Development Finance Today that

“Help to Buy supports people who want to turn their dream of owning a home into a reality.” Colleague Alok Sharman, housing and planning minister also told the website that “(t)his government is committed to fixing the broken housing market and to help more people find a home of their own, with the support of a range of low-cost home ownership products.”

However, Sam Bowman, executive director of The Adam Smith Institute, a thinktank promoting “free market, neoliberal ideas through research”, disagrees, telling LoveMoney “Reviving Help to Buy is like throwing petrol onto a bonfire … (it will) exacerbate the housing crisis it’s targeting …

“The property market is totally dysfunctional … (A)dding more demand without improving the supply of houses is just going to raise house prices and make homes more unaffordable for people who don’t qualify for the Help to Buy subsidy”.

Applying for Help to Buy

If you’re interested in finding out more about the Help to Buy scheme, please click for information on England, Scotland, and Wales (English/Cymraeg), all of which run separate schemes.