Report reveals why a new help to buy scheme for first time buyers would make sense

New analysis of the performance of the Help to Buy scheme, including loan redemptions, reveals that the initiative, introduced in 2013 to support households onto the housing ladder, has already delivered a positive return on investment for the Exchequer of more than £900 million from the first 40 per cent of loans that have been fully paid back by homeowners and interest payments to date.

Using government data, the new report by the Home Builders Federation, Road to Redemption, found that across 154,275 fully repaid loans, the government had received an uplift on the original loan value of around nine per cent, representing a profit of £718 million with a further £229m in interest income to date.

The research considers the impact that the scheme’s presence in the market had on housing supply while testing the claims made by some commentators that it led to house price inflation.

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The report shows that Help to Buy, supported almost 400,000 buyers to buy an energy efficient new build home, including just under a third of a million first-time buyer households.

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It created an unparalleled period of housing supply growth following investment from builders who were given confidence over future demand for new homes and created no discernible change in the relationship between new build prices and those of existing homes.

It has seen 154,275 households fully pay off their government equity loan and has so far generated a net return on investment of £718m for the Exchequer to date in addition to more £220m in interest payments. The HBF report also shows that it is likely to generate a positive return on investment of more than £2bn once the performance of loans and interest income has been accounted for.

The HBF say there are calls from first-time buyers, housing experts and industry representatives for government to address a void in government home ownership assistance that threatens the government’s target for 70 per cent of households to be homeowners

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HBF’s Road to Redemption report explores the role of Help to Buy in the context of long-term government support for home ownership from the 1960s up to 2022, ranging from tax relief initiatives for homeowners during the 20th Century, the controversial Right to Buy scheme and successive shared equity, guarantee and equity loan schemes deployed by the 1997-2010 Labour Governments and the 2010-2015 Coalition Government.

The HBF report adds that with previous interventions like the mortgage interest tax reliefs of the 1980s, coming at a significant cost to the Exchequer and providing no supply-side boost, and with the Right to Buy involving only the transfer of stock between tenures rather than the creation of any new homes, Help to Buy can be seen to have been a success with a long-term return being generated for taxpayers.

The HBF has called on government to build on its excellent early work in fixing the planning system by supporting prospective first-time buyers to access mortgage products that enable them to move into home ownership and into a new, energy efficient home.

It suggests that government create a targeted equity loan scheme for first time buyers underpinned by developer contributions to assist the buyers to access affordable mortgage finance with only a five per cent deposit, would lead to increased investment in new sites and more new homes delivered.

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