THE Government’s Help to Buy scheme has benefited more rich than poor households, a new report found amid claims that the scheme is a “major failure”.
Only 4,142 households with incomes of £30,000 or less used Help to Buy in the last year, according to housing charity Shelter.
This represent fewer than 0.2 per cent of England’s private renting households in this income bracket.
In comparison, more than 5,500 households with an annual income of over £80,000 have been given help-to-buy loans in the past year
Shockingly, around one in 20 households who use the scheme earn over £100,000.
The flagship scheme has also boosted profits of the country’s three largest developers – Persimmon, Barratt and Taylor Wimpey.
How do Help To Buy equity loans work?
ONE of the most popular ways to get a foot on the housing ladder, Help To Buy equity loans can be used to buy new-build properties only.
After you put down your five per cent deposit, the government will lend you up to 20 per cent of the home’s value as an equity loan – a loan provided on top of a normal mortgage.
You then take out a mortgage to cover the rest of the property’s value.
In London, the government will lend you up to 40 per cent of the property price, rather than 20 per cent limit which applies outside of London.
According to Shelter, all three have managed to more than double their reported profits in under six years, with Barratt seeing the greatest profit rise of 325 per cent.
Polly Neate, chief executive at Shelter, described the scheme as a “major failure”.
She added: “The problem with the latest changes to Help to Buy is they’ll take already expensive homes and offer to spread out the costs over a longer period, which perversely ends up with the buyer paying more.
“Given there are millions of people who can barely afford to keep any kind of roof over their head, this piecemeal approach is never going to solve the housing emergency.
“At the crux of this crisis is the desperate shortage of genuinely affordable social homes. In fact, three million more social homes are needed in the coming years.”
“This is where the new government should be taking decisive action, and where the greatest opportunity to help trapped renters lies.”
What help is out there for first-time buyers?
GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.
Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move.
Help to Buy equity loan – The Government will lend you up to 20 per cent of the home’s value – or 40 per cent in London – after you’ve put down a five per cent deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.
Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25 per cent on top.
Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25 to 75 per cent of the property but you’re restricted to specific ones.
“First dibs” in London – London Mayor Sadiq Khan is working on a scheme that will restrict sales of all new-build homes in the capital up to £350,000 to UK buyers for three months before any overseas marketing can take place.
Starter Home Initiative – A Government scheme that will see 200,000 new-build homes in England sold to first-time buyers with a 20 per cent discount by 2020. To receive updates on the progress of these homes you can register your interest on the Starter Homes website.
A Ministry of Housing, Communities & Local Government spokeswoman said: “Whatever your background or postcode, you should have the opportunity to buy a place to call your own.
“So far Help to Buy schemes have been used over 500,000 times to help families across England buy their home and we are determined to go further to help people on lower incomes onto the housing ladder.
“That’s why this week we announced a new shared ownership scheme which will allow people on lower incomes buy their home in 1 per cent chunks.”
The Help to Buy equity loan has already been criticised for helping rich buyers purchase more expensive homes, earlier this summer.
The scheme is supposed to help first-time buyers on the property ladder with smaller mortgages but analysis by the National Audit Office (NAO) found that a third who used it didn’t need to.
It found that 37 per cent of households would not have been able to buy any property without the scheme, but 31 per cent could have bought a place without it.
Around one in 25 home buyers using the scheme had household incomes of over £100,000, the NAO said.
Last month, the Sun revealed how taking the Help to Buy loan out on the wrong day could cost first-time buyers £4,765.
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