Government Help

Help to Buy prevents housebuilding slump

Adam Williams
Written By:
Adam Williams

The Help to Buy equity loan scheme has helped prevent a drop in house building, analysis from a broker firm has stated.

Mortgage Advice Bureau said Help to Buy accounted for one-in-four housing completions last year and that building would have dropped 5% without the scheme.

The Help to Buy equity loan scheme allows borrowers with a 5% deposit to get onto the housing ladder by providing a loan worth 20% of the property’s cost, which is supplemented by a traditional mortgage lender.

Some 118,830 new homes were completed during 2014 in England according to the Department for Communities and Local Government. Equity loan completions made up almost a quarter of this figure with 28,666 homes built under the scheme.

It said if these homes had not been built, total housebuilding would have been down 5% year-on-year.

The typical purchaser of a Help to Buy new build home paid 11% less than the market average with these borrowers earning 19% less than the average homebuyer.

The average house bought using the scheme in January cost £205,327, this was £25,043 less than the market average (£230,370).

Andy Frankish, new homes director at Mortgage Advice Bureau, said: “This analysis shows that Help to Buy equity loans are serving a dual purpose by opening the door for first-time buyers and propping up new build activity at the same time. The scheme is continuing to give people a vital helping hand at a stage of life when the property ladder might otherwise be out of reach.

“The data also suggests the supply of new homes in 2014 would have been noticeably worse without Help to Buy, and there would certainly have been fewer first-time buyers able to push their way to the front of the queue. This is one state scheme that has hit its mark and it will be up to the next government to build on this commitment with more radical and forward thinking measures to give house building the necessary boost.

“While the country desperately needs a long-term, joined-up housing strategy to have any hope of closing the gap between supply and demand, this should not mean discounting measures that have provided one of the few crumbs of comfort for construction in recent times.”