Chancellor George Osborne 'Help to Buy' scheme was intended to slow the decline in homeownership in the UK, but new research found the plan has pushed up house prices.
Help to Buy has added around £8,250 to the average house price, an increase of 3 per cent on the average cost of a UK home, according to a new study by Shelter, the houseless and homelessness charity.
Under the Chancellor's programme, people unable to afford a home should be assisted through government loans and guarantees, enabling them to purchase a property with a deposit as low as 5 per cent.
The research found that it has helped a small number of people to purchase a property, at the expense of worsening the overall affordability crisis for everyone else. In other words, by allowing more people to buy a property it also boosted mortgage lending volumes and boosted the prices.
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Some parts of the country were more affected by the scheme than others. The research suggested that Help to Buy has so far done little to help home buyers in the highly expensive areas of the country such as London or the South East.
Instead, the scheme is putting greater upward pressure on house prices in more affordable regions. In North West Leicestershire, house prices have risen to nearly £20,000 as a result of the plan, the report found. While in the North East, properties in South Tyneside have been pushed up by more than £13,000.
According to the Campbell Robb, Shelter’s chief executive although the scheme has brought forward home ownership for some buyers, by adding to house price inflation it is making it progressively harder to buy a home for millions more who have been priced out.
“This is proof that Help to Buy hasn’t helped many people at all, instead it’s pushed a home of their own even further out of reach. Current government schemes do nothing to help all the millions of people with no choice but to remain stuck in expensive and unstable private renting," Mr Robb said.
Since its launch in 2013 'Help-to-Buy' has already supported over 100,000 homes purchases across the UK. With the extension of the scheme until 2020, the government will spend up to £6 billion on equity loans and will guarantee up to £12 billion worth of mortgages.
Previous research by the National Housing and Planning Advice Unit found, on which Shelter’s research is based found out that every 1 per cent increase in the volume of mortgage lending increased house prices by 0.36 per cent.
