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First-time Buyer

Help to Buy may not offer taxpayer value for money, warns audit office

Joanna Faith
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Joanna Faith

The Help to Buy equity loan scheme may not provide value for money, the spending watchdog has warned.

The government initiative, which was introduced last year to help first-time buyers get onto the property ladder, has made homes more affordable to buyers, but the cost to the taxpayer “is uncertain at this time”, the National Audit Office (NAO) said.

The watchdog criticised the government for not having a “joined-up approach” to evaluating the combined impact of its housing market initiative.

“The Help to Buy equity loan scheme is improving access to mortgage finance and for the most part is running smoothly,” said Amyas Morse, head of the NAO.

“But the scheme’s costs, which come in large part from tying up £3.7bn long-term in the housing market, will be substantial.”

Under the Help to Buy scheme, buyers are offered an equity loan of up to 20% of the purchase price on new build properties up to the value of £600,000. This supplements the buyers’ own deposit, which mortgage lenders normally require to be at least 5%.

However, the NAO said that 1.6% of buyers had purchased homes with a deposit contribution of less than 5%, slightly increasing taxpayers’ exposure to costs if these properties are repossessed.

The government expects to recoup its investment in cash terms after around 15 years, and to go on to recoup £4.8bn – more than it is investing in the scheme.

But the NAO warned this would depend on when buyers redeem their equity loans and the value of the government’s stake at the time.

“During this time, cash flow is likely to vary between years and the impact of this in some years could be unaffordable for the Department for Communities and Local Government. The Department estimates that the scheme’s cost in today’s terms is £494m,” the NAO said.

“For the economic benefits to exceed the costs, the Department calculates that over a quarter of sales under the scheme would have to lead to a new home being built. Assessing whether this happens is therefore crucial to deciding whether the scheme is value for money,” it added.