"It's been one giant con from the start"
The total number of completions under the government’s Help to Buy scheme was down by 41% in the fourth quarter of 2021 compared to the same period in 2019.
Official government figures showed that there were 8,913 properties purchased with a Help to Buy, using a total value of £604 million in equity loans and supporting the purchase of £2,543 million worth of property in Q4 2021.
The Department for Levelling Up, Housing and Communities noted that following the introduction of the new and current Help to Buy scheme in April 2021 with eligibility restricted to first time buyers and new regional price caps, completions have reduced.
To allow comparisons to be more representative of a typical quarter, completions from 2021 were compared against completions in 2019 as there was a notable variation in 2020 figures as a result of the pandemic.
Rhys Schofield, managing director at Belper-based Peak Mortgages and Protection, said it was not surprising that numbers are down from 2019 as regional price caps had been introduced since then.
“Those are really starting to bite in some parts of the country. House price rises in some areas have outstripped the cap,” Schofield said.
“Help to Buy was a real support to first time buyers in that first year of COVID. It was pretty much the only practical way without the Bank of Mum and Dad that many could get on the ladder with a 5% deposit for around a year,” he added.
One industry expert cited another reason why the number has dipped compared to previous years.
“Homebuyers are being more creative with deposit-raising than ever before. Rather than entering a government-run scheme that shares in the growth of their property value, buyers are turning to ‘the Bank of Mum and Dad’, or ‘Nan and Grandad’ to fund their deposits,” Stuart Powell, managing director of Plymouth-based Ocean Mortgages, said.
“During 2021 and the first quarter of 2022, equity release experienced a growth boom, a significant portion of which was used for house deposits. By gifting funds raised from their property using lifetime mortgages, parents are helping their children on to the property ladder. This has become a viable alternative to Help to Buy and partly explains the reduction in Help to Buy loans,” Powell explained.
The Help to Buy scheme also has its share of critics from the property industry.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said many people have been fooled into using Help to Buy.
“It’s been one giant con from the start and has been directly involved in pushing house prices higher and faster than they ever needed to. The only people that have really benefited are developers and their shareholders in bumper dividend payouts and the government who have piggy-backed on soaring property prices rises which they engineered themselves,” Shaw said.
Paul Neal, of Derbyshire-based Missing Element Mortgage Services, said it would be interesting to know how much more the government is going to be repaid under the scheme.
“I had a client this week who originally borrowed £36,000 through the scheme and over the past five years, their property’s value has increased and now, they have to pay back £48,000. That’s £12,000 over a five-year period,” Neal related.
“Now, times that by 355,634 properties and that will fund a lot of parties in Downing Street in the coming years.”
Since the scheme was first introduced in April 2013 up to December 31, 2021, a total of 355,634 properties were bought with an equity loan, according to the government.
The total value of these equity loans so far totalled £22 billion, while the value of the properties sold was £99 billion.