A loan scheme that supported 325,000 first-time buyer households onto the housing ladder generates significant return on investment – but its closure means for the first time in 60 years no buyer support exists.
A new analysis of the performance of the Help To Buy scheme, including loan redemptions, reveals that the initiative introduced in 2013 has already delivered a positive return on investment for the Exchequer of more than £900m.
This is from the first 40% 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 found that across 154,275 fully repaid loans, the government had received an uplift on the original loan value of around 9%, 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.
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; has seen 154,275 households fully pay off their government equity loans; 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 claims it is likely to generate a positive return on investment of more than £2 billion once the performance of loans and interest income has been accounted for.
The Federation 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 now also being generated for taxpayers.
HBF now wants the government to replace the void left by Help to Buy with a targeted equity loan scheme for a new generation underpinned by developer contributions to assist their 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.
An HBF spokesperson says: “The new government has recognised the importance of addressing the ever-worsening housing crisis. The early work of ministers to reform the planning system provides the foundation for an increase in housing supply, but housing market conditions and mortgage terms continue to work against first-time buyers imposing a limit on what can be achieved.
“If government is to achieve its housing ambitions it needs to consider what targeted support it can provide to help buyers onto the housing ladder
“The Help to Buy scheme supported the fastest increase in housing delivery on record and the positive returns it is now generating for taxpayers shows that intervening to support first-time buyers, as governments have done for decades, can have widespread social and economic benefits.”