Government lends £22 billion to help to help more than 350,000 households purchase a new home with Help to Buy scheme.

The government has advanced more than £22 billion to help people buy a home through the Help to Buy equity loan scheme.

A total of 355,634 households in England have bought properties, collectively valued at £99 billion, since the initiative was first launched in April 2013.

Nearly 9,000 first-time buyers used Help to Buy to get on to the property ladder during the final three months of 2021 alone.

The scheme enables people to purchase a new-build property with just a 5% deposit, which the government tops up with a 20% equity loan, rising to 40% in London.

The loan is interest-free for the first five years.

The initiative was initially open to all buyers, but it was restricted to people purchasing their first home in April 2021, when regional price caps on the properties that could be bought were also introduced.

First-time buyers who want to take advantage of the scheme have until the end of March 2023 before it closes.

What impact have the changes had?

The number of properties bought through the Help to Buy scheme were 40% lower in the final three months of 2021, compared with the same period of the previous year.

The drop is due to the fact that the scheme is now restricted to first-time buyers only.

The government introduced this rule, along with regional price caps, to ensure the money went to those who would struggle to buy a home on their own.

The average value of properties bought through the scheme has fallen in all regions, apart from London, since the new version of the scheme was introduced.

This is likely to be due in part to the regional price caps, which range from £186,100 in the North East, to £437,600 in the South East.

The maximum value of a home that could be bought through the scheme remained unchanged at £600,000 in London.

At the same time, limiting Help to Buy to first-time buyers will also have impacted the average value of property purchased, due to the fact that this group typically buy lower value homes.

The average household income of buyers using the scheme has also fallen in all regions since the changes were made, as has the average size of the deposit they put down.

The figures suggest the changes to the scheme have been successful in targeting it to those who most need help purchasing a property.

What type of homes are being bought?

Since the new version of the Help to Buy scheme was introduced, there has been a steep fall in the number of detached properties being purchased.

Only 14% of homes bought with the current scheme were detached, down from 32% under the previous version.

Instead, there has been a rise in more typical first-time buyer properties, with 29% of people using the scheme buying flats, up from 18% previously, while 42% bought semi-detached homes, compared with 32% before the changes were introduced.

The exception is London, where the vast majority of properties purchased through the scheme continue to be flats.

Only 8% of properties bought through Help to Buy in all regions have four or more bedrooms, compared with 28% previously, while a third have two-bedrooms, up from 22%.

What other schemes are there?

The Help to Buy equity loan is one of a number of government schemes to help people get on to the property ladder.

Both first-time buyers and home-movers who only have a 5% deposit can also use the 95% mortgage guarantee scheme.

Other initiatives include First Homes, under which first-time buyers, key workers and local people can purchase a home at a 30% discount to its market price.

And there’s also Shared Ownership, which enables people to buy a share in a property and pay rent on the rest.

First-time buyers saving for a deposit can also use the Lifetime ISA, under which you can save £4,000 a year. The government then adds a 25% bonus – up to a maximum of £1,000 annually – for free.

The money must be used to either purchase a first home or for retirement.

First-time buyers are also exempt from stamp duty on the first £300,000 of a home purchase on properties costing up to £500,000.

Key takeaways

  • The government has loaned more than £22 billion to help people buy a home through Help to Buy
  • 355,634 households in England have bought properties through scheme, collectively valued at £99 billion
  • First-time buyers have until the end of March 2023 to take advantage of Help to Buy before it closes