Higher-income households benefited most from Help to Buy, thinktank finds | Property

High-income households were the biggest beneficiaries of George Osborne’s Help to Buy mortgage schemes introduced in the 2010s, according to an analysis by the Institute for Fiscal Studies (IFS) think tank.

Help to Buy, launched by the Conservative-Lib Dem coalition government in 2013, included two separate schemes aimed at making home ownership more affordable at a time when house prices were rising rapidly.

The first was taxpayer-backed loans to reduce the amount of deposits buyers required. The second was a mortgage guarantee scheme that covered some of lenders’ potential losses from high loan-to-value mortgages.

Both applied for homes worth up to £600,000 and supported around a fifth of first-time buyers as of 2014-15.

However, using a new approach based on survey data and local property prices, the IFS suggests that the bulk of this benefit goes to high-income earners who can eventually afford to buy a home, particularly those living outside London and south-east England where property is cheaper.

Bee Boileau, research economist at the IFS and a co-author of the briefing, said: “Help to Buy policies could, in theory, help first-time homebuyers get on the housing ladder, but could also raise house prices and require the government to take on the risk associated with loans that the private sector would not normally want to make.

“Our research shows Help to Buy schemes, launched in 2013, have had the biggest impact on higher-income households in terms of making more homes affordable.”

The report adds: “As these people are normally expected to be able to save fairly quickly for a minimum deposit, even without Help to Buy, these schemes are likely to accelerate their first home purchase by a number of years rather than making the difference between home ownership or not in the long term.”

The analysis suggests the mortgage guarantee scheme has “limited impact on affordability” as buyers are still limited to the maximum multiple of their income they can borrow.

The credit scheme was “more important to almost all households” in terms of improving the affordability of local properties. However, it had a much narrower scope as it only applied to new-build properties and was “effectively silenced”, according to the IFS.

The think tank argues that the two programs have little impact on social mobility. Boileau said future governments could target aid to low-income households if they wanted to tackle inequality, but warned this could mean taxpayers took on more risks.

Help to Buy has been criticized by many experts for inflating prices without increasing housing supply: a 2022 report by the House of Lords built environment committee suggested that money spent on the scheme would be “better spent on increasing housing supply”.

A version of the mortgage guarantee scheme was reintroduced in 2021 and made permanent by Labor last year. This version aimed to ensure that 95% of mortgages remained available.

Conservative housing minister James Cleverly defended Help to Buy, saying: “The previous Conservative government’s Help to Buy programs gave thousands of people the chance to realize the dream of owning a home. Under Labour, by contrast, things have become increasingly difficult for first-time homebuyers, with a sharp decline in house building and stamp duty charges rising.”