The Institute for Fiscal Studies (IFS) has warned that previous Help to Buy schemes had a limited impact on social mobility and mainly benefited high earners. According to the IFS, the schemes were most beneficial to people living in London and the South East and those among higher income percentiles. The schemes neither entrenched inequalities in housing affordability based on parental background nor boosted social mobility, the IFS said.
Help to Buy involved two separate schemes: taxpayer-backed loans to reduce deposits and a mortgage guarantee scheme covering part of lenders' potential losses on high loan-to-value mortgages. The previous equity loan scheme ran from 2013 to 2023 and offered loans for new-build house purchases of up to 20% of the sale value. The equity loan scheme handed out 390,000 loans totaling £25bn over its 10 years of operation. A second mortgage guarantee scheme initially ran from 2013 to 2016 and was later revived, offering 105,000 mortgage guarantees totaling £15.8bn during its initial lifetime. Both schemes applied to homes worth up to £600,000 and by 2014-15 supported about a fifth of first-time buyer purchases.
The mortgage guarantee scheme had limited effects on housing affordability because most Brits are barred from homeownership by their incomes, not deposit prices, the IFS said. The equity loan scheme had more impact on affordability than the mortgage guarantee scheme, but its effect was muted because it was limited to new-build properties, according to the IFS. The schemes likely accelerated first home purchases by a few years for higher-income households rather than making the difference between becoming a homeowner or not in the longer term, the IFS reported.
Current developments include the government reportedly considering revising Help to Buy, as leading housebuilders call for a new equity loan scheme to revive demand for homes and boost the construction industry. A version of the mortgage guarantee scheme was reintroduced in 2021 and made permanent by Labour last year, aimed at ensuring 95% mortgages remain available.