Mortgage blog: Government scheme bad for taxpayers, says report
New figures have revealed that one of the government's controversial mortgage initiatives has helped thousands of buyers onto the property ladder. The Help to Buy equity loan scheme supported the purchase of 2,283 properties in May, with the vast majority of these loans being granted to first-time buyers.
However, an influential committee of MPs has found no evidence that the scheme is providing value for money for taxpayers.
Help to Buy supports over 22,000 new home purchases
New data from the Department for Communities and Local Government has revealed that the Help to Buy equity loan scheme supported the purchase of 22,831 properties in the 14 months to the end of May 2014.
Under the first part of the government's Help to Buy initiative, you are entitled to an equity loan on the purchase of new homes up to a value of £600,000. If you access the scheme it means that you need to put down a minimum of 5% deposit. You can then take advantage of an equity loan of up to 20% meaning that you only need a mortgage of 75%.
According to the statistics, the majority of sales were to first-time buyers. First-time buyers represented 86% of total sales and the average (mean) purchase price was £206,084.
The data also revealed the five areas in which the scheme had helped the most people. The top local authorities in terms of legal completions were:
- Central Bedfordshire
- Milton Keynes
However, while the scheme has helped thousands of first-time buyers, an influential committee has claimed Help to Buy is not offering value for money for taxpayers.
Help to Buy ‘violated' Treasury guidelines
A new report by the Public Accounts Committee (PAC) has concluded that the first phase of Help to Buy had failed in its objectives and that the government has yet to demonstrate that its flagship scheme is providing value for money.
The PAC has warned that the scheme creates a medium- and long-term risk to the taxpayer and that the Department for Communities and Local Government (DCLG) violated Treasury guidelines by failing to carry out any assessment of alternative options before going ahead with the initiative.
Committee chair Margaret Hodge said: "This means it has committed to spending up to £10bn on supporting Help to Buy without establishing whether it represents the most effective way of using taxpayers' money to achieve its objectives. There are also more immediate risks, particularly the fact that some buyers have accessed the scheme with deposits of less than 5%, which increases taxpayers' exposure to risk."
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