Help to Buy has pushed up house prices and helped rich get on the housing ladder
THE Government's Help to Buy equity loan has pushed up house prices and helped rich buyers purchase more expensive homes.
The scheme is supposed to help first-time buyers on the property ladder with smaller mortgages but new analysis by the watchdog found that a third who used it didn't need to.
The Government will lend buyers up to 20 per cent of the property value - up to 40 per cent in London - interest-free for the first five years to help those on lower-incomes.
Research by the National Audit Office (NAO) found 37 per cent of households would not have been able to buy any property without the scheme, but 31 per cent could have bought a place without it.
Shockingly, around one in 25 home buyers using the scheme had household incomes of over £100,000, the NAO said.
Over the whole scheme, which is only available on new-builds and is not means-tested, 10 per cent of buyers had household incomes of over £80,000, or over £90,000 in London.
How do Help To Buy equity loans work?
ONE of the most popular ways to get a foot on the housing ladder, Help To Buy equity loans can be used to buy new-build properties only.
After you put down your five per cent deposit, the government will lend you up to 20 per cent of the home's value as an equity loan - a loan provided on top of a normal mortgage.
You then take out a mortgage to cover the rest of the property's value.
In London, the government will lend you up to 40 per cent of the property price, rather than 20 per cent limit which applies outside of London.
The report also found that buyers who used the scheme paid one per cent more for their property than those who didn't.
It might not sound like much, but on a home worth £200,000 that's an extra £2,000.
When the scheme ends in 2023, it's expected to have cost the Government around £25 billion.
The watchdog added that the Government's challenge now was to wean the property market off the scheme, which was launched in April 2013.
Gareth Davies, head of the NAO, said: "[As well as helping first-time buyers] The scheme has also exposed the Government to significant market risk if property values fall, as well as tying up a significant public financial capacity.
"Until we can observe its longer-term effects on the property market and whether the department has recovered its substantial investment, we cannot say whether the scheme has delivered value for money."
A spokesman for the Home Builders Federation (HBF) said Help to Buy has delivered against its objectives, to increase home ownership, boost housing supply and generate economic activity.
He said: "At present, the mortgage market is not equipped to support realistic lending to first-time buyers purchasing in the new-build sector.
"We will continue to work with lenders and stakeholders to try and ensure the withdrawal of Help to Buy does not lead to reduced housing supply or first-time buyer aspiration."
Housing Minister Kit Malthouse said the scheme has been "win-win" - supporting first time buyers, increasing home building and also set to make a profit for the public.
He said: "From 2021 the scheme will be extended and strengthened to make it exclusively for first-time buyers to support those who need it most."
Last month, we revealed how taking the Help to Buy loan out on the wrong day could cost first-time buyers £4,765.
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