Help to Buy equity loans avert a 5% drop in housebuilding

The Help to Buy equity loan scheme (HTB1) helped to avert a 5% drop in new housing completions in England last year, according to new analysis by Mortgage Advice Bureau (MAB) – the UK’s best known broker brand.

A total of 118,830 new homes were completed in England during 2014 according to data from the Department for Communities and Local Government (DCLG). Equity loan completions over the same period – 28,666 – made up 24% of this figure, exceeding the 20% contribution of housing associations across the country.

Total housing completions in 2014 were 9,260 (8%) higher than in 2013 when 109,570 new homes were built. But discounting HTB1 completions from both 2013 and 2014, the total number of new homes would have fallen by 5% year-on-year from 94,526 in 2013 to 90,164 in 2014.

New data from Mortgage Advice Bureau’s National Mortgage Index also shows homebuyers using Help to Buy equity loans paid 11% less than the market average for a house purchase at the start of 2015.

A typical house bought through the scheme in January cost £205,327, which was £25,043 less than the average across the purchase mortgage market (£230,370). At the same time, the average salary of a buyer using HTB1 was £32,338: 19% less than the market average of £39,811.

With the average HTB1 buyer also aged five years younger (31.5 years vs. 36.7 years) the data shows the scheme is continuing to serve its purpose of broadening access to the housing ladder among younger – often first-time – buyers.

Andy Frankish, New Homes Director at Mortgage Advice Bureau, comments:

“This analysis shows that Help to Buy equity loans are serving a dual purpose by opening the door for first time buyers and propping up new build activity at the same time. The scheme is continuing to give people a vital helping hand at a stage of life when the property ladder might otherwise be out of reach.

“The data also suggests the supply of new homes in 2014 would have been noticeably worse without Help to Buy, and there would certainly have been fewer first-time buyers able to push their way to the front of the queue. This is one state scheme that has hit its mark and it will be up to the next government to build on this commitment with more radical and forward thinking measures to give house building the necessary boost.

“While the country desperately needs a long-term, joined-up housing strategy to have any hope of closing the gap between supply and demand, this should not mean discounting measures that have provided one of the few crumbs of comfort for construction in recent times.”

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