Health of help to buy

The Help to Buy programme was introduced in 2013 as “the biggest government intervention in the housing market since the Right to Buy scheme of the 1980s”.

But how successful has Help to Buy been in getting Brits onto the property ladder?

We’ve examined the data to find out the state of Help to Buy in 2019, including how many homebuyers have taken advantage of the scheme, how much the government has loaned and paid out, and where the country’s Help to Buy hotspots are located.

What is Help to Buy?

The Help to Buy programme was announced by then Chancellor George Osborne in his 2013 Budget. It consists of two main schemes: an equity loan and the Help to Buy Individual Savings Account (ISA)*.

With the equity loan, you put down a 5% deposit on a new-build property, with the government lending you up to 20% of the property’s value (40% in London). You only start paying interest on this loan after five years.

The idea is that you only need a mortgage for 75% - interest rates are lower for a mortgage of this size than they would be for a 95% loan.

With the Help to Buy ISA, which began in 2015, you pay money into a savings account that pays tax-free interest, with the government giving you a 25% bonus on top, which could total £3,000 if you save the maximum permitted amount of £12,000 (giving a total of £15,000). You only get the bonus if you use the money in your ISA to buy your first house.

To find out more about Help to Buy head to the official Help to Buy website.

Over 200,000 homes have been bought in England using the Help to Buy equity loan since its launch in 2013, with the government lending a total of £11.7bn, with the average loan working out at £55,498.

The number of houses being bought under the scheme has steadily increased since its introduction, from 14,023 in 2013 to 52,057 in 2018 – and 81.08% of those taking advantage of the Help to Buy equity loan were first-time buyers.

Number of equity loans by region

The region with the highest uptake of the equity loan was by far the South East, with 35,864, although in London this number was almost half (16,738). Just 13,805 houses were bought under the scheme in the North East.

Value of equity loans by region

While it had a relatively low uptake compared to other regions, London has received the second largest amount from equity loans, largely due to much higher property prices, as well as the fact that Londoners are entitled to a loan of 40% of the property’s value, rather than the 20% available elsewhere.

Highest uptake of equity loans by local authority

Drilling down to local authority level, the areas which have seen the most homebuyers take advantage of the scheme are Wiltshire (3,115) and Central Bedfordshire (2,958) followed by two Yorkshire cities, Wakefield (2,932) and Leeds (2,678).

In contrast, the areas with the lowest take-up were the affluent London boroughs of the City of London (5) and Kensington and Chelsea (9), as well as Eastbourne (20), West Somerset (26) and, perhaps surprisingly for such a major city, Brighton and Hove (27).

Highest amount received from equity loans

In terms of the amount paid out by the government, again, it’s London and southern England that have benefitted the most from the scheme, with the London Borough of Barnet the area that has received the most.

Another key part of the Help to Buy scheme is the Help to Buy ISA. Savers can pay in up to £200 a month into a tax-free savings account, with the government adding a 25% bonus. The maximum permitted amount of savings is £12,000, giving a potential bonus of £3,000.

This scheme was launched in December 2015, and since then, 286,604 bonuses have been paid out, to a value of around £258m (with the average homebuyer receiving a bonus of £900).

As with the equity loan, the number of people taking advantage of the Help to Buy ISA has steadily increased since its launch, from 62,256 in 2016, to 109,562 in 2017 and 114,786 in 2018.

Volume/percentage of total bonuses

Stats also show that the vast majority of those receiving the ISA bonuses are aged 25 to 34 (67%), while only a fraction of bonuses have been paid out to over 50s, and just one person under the age of 18 has cashed theirs in!

Volume/value of bonuses paid out per region

Unlike with the equity loan, which seemed to be much more popular in the south, the Help to Buy ISA has seen more uptake in the north, with the majority of bonuses being paid out in the North West.

Value of bonuses paid by local authority

The top five areas which have had the most bonuses paid out are among the biggest cities in the country, with Leeds again being a major beneficiary, while at the other end of the scale affluent areas in London and the surrounding counties have made little use of the scheme.

Average bonus received by local authority

We also worked out the average bonus being received in each local authority, as well as the average price paid on properties being bought through the scheme, to calculate how much of the overall value of houses is being covered by their Help to Buy ISA bonus.

The figures show that those in Scotland, Northern Ireland, Wales and the North are benefitting the most from the scheme, with some having over 0.75% of the value of their house paid for by the Government, while in London, that figure falls to below 0.3% in some boroughs.

Overall, just under 500,000 homes have been purchased with the help of either a Help to Buy equity loan or a bonus from a Help to Buy ISA, with the government paying out just under £12bn across both schemes.

This has undoubtedly helped many people to get onto the property ladder, but the research shows that some areas are benefitting more than others.

While those in London and the south of England are much more likely to take advantage of the scheme due to the higher house prices in those areas, the stats show that buyers in areas with lower house prices are getting the most out of it, such as the north of England, Scotland and Wales.

However, the scheme has attracted a lot of criticism too, with claims that it has simply inflated house prices, rather than helping young buyers buy their first homes.

*Other Help to Buy schemes such as Shared Ownership also exist, although statistics have not been made available for these.

Brought to you by Compare the Market
More info on Help to Buy