In its ‘Help to Buy: Equity loan scheme’ report, the Public Accounts Committee (PAC) forecast that by the time the scheme ends in 2023, the government would have lent £29bn to those using the initiative.
It also said these loans could put buyers at risk as they are unregulated, and the PAC claimed the government did “not fully understand the scale or effect on buyers of this ‘new-build premium’” which are on average 20 per cent more expensive than other properties.
It suggested it could impact those who needed to sell soon after purchase only to find their property was worth less than what they paid for it.
In a scathing evaluation, the committee also said the majority of those who used the scheme “did not need it”, as just 37 per cent of those who used the scheme said they wouldn’t have been able to afford a house otherwise indicating some 63 per cent were already in a position to buy a house.
Additionally, some 20 per cent of those who were assisted by the scheme were not even first-time buyers.
The PAC said although Help to Buy had boosted the house-building sector, its ultimate end may bring a decline in housing supply which it evaluated had increased by 14 per cent since its introduction.
The report added that while Help to Buy had helped to stabilise the housing market after the 2008 financial crash, the additional funding announced in 2017 “might not have been necessary or delivered enough value” as the market and mortgage availability had already improved by then.
Meg Hillier, chair of the PAC, said: “Help to Buy, as the department acknowledged, only benefits those in a position to buy their own house in the first place. It does not help make homes more affordable nor address other pressing housing problems in the sector such as the planning system or homelessness.
“The scheme exposes both the government and consumers to significant financial risks were house prices or interest rates to change. Better consumer protection needs to be built into similar schemes in the future.”
A spokesperson for the Ministry of Housing, Communities and Local Government added: “Help to Buy has been life changing for many first-time buyers across the country. Help to Buy schemes have already been used more than 500,000 times by families to make the crucial first step on the property ladder and enjoy the security and stability that comes with it.
“In the last year 52,000 households have bought a home with support from Help to Buy equity loans, of which more than 43,000 were first-time buyers – the highest-ever annual total.
“This scheme, along with wider government support, has ensured that the number of first-time buyers is now at an 11-year high.”
“However,” they said, “We will always consider suggestions on how the Help to Buy scheme could work better.”